UK Edition
Farming giant warns of soaring dairy prices with hard Brexit
Milk, cheese and cream prices could soar if a transitional agreement is not forged to save imports and exports from World Trade Organisation tariffs of 36pc after Britain leaves the European Union, the UK’s largest milk producer will warn today.
Arla Foods, the co-operative owned by 12,000 farmers across seven European countries, will also release a Centre for Economics and Business Research study showing that its UK business has a total economic footprint of £6bn a year in gross value added and can be associated with 119,000 jobs.
The co-operative, which has 2,485 British farmer owners, has annual UK revenues of £2.2bn, 29pc of Britain’s dairy manufacturing market and nearly 3,500 workers.
Tomas Pietrangeli, managing director for Arla UK, said: “The biggest risk we see is not having free movement of goods, which we think will have significant consequences not only for Arla but for the total dairy industry.
“If we move into a hard Brexit and there is no transitional agreement in place, that would have potentially bigger implications than those just for us as a company. It is generally a low-margin business so 36pc tariffs pretty much closes exports and imports. If you look at dairy exports and imports in the UK, there is a deficit of 25pc.
“There is neither the milk nor the capacity in the UK to supply the population with their need of dairy products, which has potential implications in terms of food inflation, supply and quality.”
Arla produces 3.2bn litres of milk a year in the UK, selling under the Cravendale and Lactofree brands. It is owned by farmers in Sweden, Denmark, Germany, the Netherlands, Belgium, Luxembourg and the UK, with its group headquarters in Denmark.
Its farmers have invested more than £500m in the UK manufacturing and supply chain over the past ten years.
Mr Pietrangeli said the vast majority of products made at its 15 UK sites are from UK milk.
Its exports from the UK, however, have grown by a double-digit percentage over the past two years.
Arla UK now sends goods to 69 countries, exporting UHT milk to China and shipping Cheddar cheese to a number of markets. Its imports include Lurpak butter from Denmark.
Mr Pietrangeli said the loss of EU subsidies is also a “significant risk” to UK dairy farming.
“Our farmer members will need to be able to compete both in a global and a European context, having no EU subsidies while European Union farmers will continue to have them,” he said.
The third key risk, he said, is continued access to European labour.
“Arla has a very small percentage of non-UK workers,” he said.
“However, if you look at our farmer owners and the people they employ, they are much more dependent on non-British labour.”