WITHOUT PRACTICAL action by both the UK Government and the European Union, the food sector and consumers on both sides of the Brexit divide will be badly impacted when the split comes into final effect on January 1, 2021.

Perhaps no company appreciates this more keenly than farmer-owned dairy giant Arla, whose European and UK businesses straddles the new economic faultlines opening up along the English Channel and north-south Ireland border.

With that exposure in mind, Arla commissioned a report from the London School of Economics looking into what 'pragmatic and practical' steps can be taken now to lessen the negative effects of those borders suddenly becoming considerably less 'friction-free'.

Warning that higher trade tariffs and the establishment of new non-tariff barriers will likely cause the price of fresh foods to rise significantly, the 'Vulnerabilities of Supply Chains Post-Brexit' report, outlined just how interlinked the food sectors in the UK and EU are.

At present, a total of 40% of agricultural and food products consumed by households and businesses in the UK are imported from the EU, noted the LSE report. In the dairy sector, 15% of all products sold are imported into the UK, and 99%of this currently comes from the EU.

A no-deal departure, with high tariffs, will hike up the prices of many of Britain’s favourite products; and even with a deal, non-tariff barriers such as increased paperwork and customs checks will have a major impact, increasing prices and reducing product availability.

Yet Arla's own research has shown that consumers expect to have the products they want on the shelves, and do not want or expect to pay any more.

LSE pointed out that the issue was not limited to products on supermarket shelves, but also affected agricultural production, as major inputs into the production and manufacturing of food will also be affected – 69% of some aluminium products, 65% of certain pharmaceutical goods and 51% of many fertilisers are imported from the EU. Costs from tariffs and non-tariff barriers on these goods will hit farmers and processors across the UK, it warned.

"The LSE report reminds us that the UK has benefited enormously from established trade links with the EU until now, giving UK consumers access to affordable products farmed and made to the same high standards as in this country," said Arla. "The importance of these trade links was reinforced this year by the coronavirus outbreak when imports of many products including butter rose sharply to cope with changing patterns of demand. The end of the transition period risks breaking those connections, significantly impacting food accessibility."

Whilst the British food and drink sector is strong and has the potential to grow, the LSE report suggested that it will take many years and 'hundreds of millions of pounds of investment' to build capacity to replace imports from the EU.

However, the report also makes clear that a way out of this situation is in reach – in particular, a trade deal for food and drink would deliver major benefits not just for UK consumers and producers but also for exporters of these products from Europe.

Other practical steps that can be taken include confirming Great Britain’s SPS regime and clarifying the UK’s Border Operating Model, showing how customs clearance and payment of customs duty will be simplified. The LSE report also calls for the Goods Vehicles Management System and Smart Freight Service to be tested and functional before the end of the year, and in the medium-term for alterations to be made to the UK’s proposed new immigration regime.

UK managing director of Arla Foods, Ash Amirahmadi, commented: “This report shows how integrated the UK-EU food supply chain is and the mutual benefits this brings to both sides. Because of this free trade with our largest trading partner UK customers have access to a large choice of high quality, affordable, products. We want to ensure this continues after December 31, 2020, and we know consumers expect this to happen as well. But for this to happen it is essential we secure a tariff-free agreement. And it is vital too that the Government takes pragmatic and sensible steps to limit the impact of non-tariff barriers.”

Lead of the Trade Policy Hub and one of the authors of the LSE report, Dr Elitsa Garnizova, added: “Tariffs imposed on food and drink are typically very high, so the impacts of a no-deal Brexit will inevitably have profound effects on customer choice. Even with risk management strategies in place, no-deal will have significant impact on the fresh foods sector and these need to be considered by policy-makers in the coming weeks.”

The report also takes a longer-term perspective, showing that whatever deal is done and whatever steps are taken, flows of food and drink products to and from the UK are set to change very significantly over the coming years. It calls for the Government to take a strategic approach, working with farmers, processors and the rest of the supply chain to address the challenges and harness the opportunities that arise to ensure that farmers, consumers and the food industry all benefit from what happens once the UK is fully out of the European Union.