Dairy co-op Arla warns of no-deal Brexit price hikes

‘Arla Foods has consistently advocated for as free a trade as possible once the UK leaves the EU’

Farmer-owned dairy co-op Arla has repeated its warning that a no-deal Brexit would lead to higher prices for its products.

The co-op – whose brands include Skyr yogurt, Lurpak, Cravendale and B.O.B – imports about 15% of its products and says tariffs could add 30% to its prices if there is no free trade deal between the UK and EU when the transition period ends on 1 January. Its UK boss told the BBC that if the UK could not strike a free trade deal with the EU, tariffs could add as much as 30% to their prices.

Even with a deal, extra border checks could still raise costs and disrupt supplies, Arla’s UK managing director, Ash Amirahmadi, warned the BBC.

He said Arla faces an extra 30,000 pieces of paperwork after Brexit, which could add 10% to costs – and as a low margin business, it would have to pass on costs to retailers.

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The co-op of 2,300 UK farmers is a “low margin business”, he added, and would have no choice but to pass on increased costs to retailers – potentially making it more expensive for shoppers to access dairy nutrition.

Mr Amirahmadi’s comments yesterday reiterate a warning made by Arla in September, after the release of a report it had commission from the London School of Economics (LSE).

The Vulnerabilities of Supply Chains Post-Brexit report, produced by LSE Consulting’s Trade Policy Hub, revealed that 40% of agricultural and food products consumed by households and businesses in the UK are imported from the EU. In the dairy sector, 15% of all products sold are imported into the UK, and 99% of this currently comes from the EU.

The report said countries like Denmark, Spain, Netherlands, Belgium, France, Italy, Greece, Cyprus and Ireland are all estimated to see a fall in food exports to the UK.

A no deal Brexit would disproportionally affect the food and beverage sector, it adds, with average tariffs rising from 0% to 17.7% for EU exports to the UK, which is more than four times other sectors.

“Arla Foods has consistently advocated for as free a trade as possible once the UK leaves the EU,” said Peter Giortz-Carlsen, the co-op’s executive vice president. “This is the best outcome for the European food and beverage sector – including dairy. There is a risk that in a no deal scenario, the UK market for EU dairy will be significantly impacted.”

Consumers in the EU consumers will also suffer, added the report: it found that average prices for UK branded products imported into the EU will increase by 27.9% under a no deal and unbranded UK products to the EU will increase by 13.2%.

Even if a deal is reached, the EU and UK should avoid the creation of new non-tariff barriers and custom requirements, particularly for perishable goods, the report said.