Arla Foods UK has commissioned ÐÓ°ÉÂÛ̳ Consulting’s Trade Policy Hub to deliver a study on the vulnerabilities of supply chains in the United Kingdom and the European Union after Brexit. This study provides a follow up to the report ÐÓ°ÉÂÛ̳ Consulting delivered in July 2018 on the impact of Brexit on the dairy sector in the UK. This report takes a broader look at the food and beverage sector rather than dairy specifically and looks at a wider range of potential disruptions and mitigation measures.
The report shows that consumers in the UK are highly dependent on products originating in the EU where 40 percent of all consumption of food products in the UK comes from EU countries, suggesting that UK consumers are highly exposed to changes in the future trading relationship. As a consequence, we can expect that consumers in the EU may also notice increased prices and reduced availability of products from the UK, especially for products for which the UK is an important producer.
The report shows that the disruptions across the supply chains will be particularly severe in a no deal Brexit scenario due to high average tariff rates in the food and beverage sectors. The effects are particularly striking vis-à-vis trade flows: both scenarios (no deal and FTA) will result in reduced product availability of EU products, reduced traded volumes across the UK and the EU, and higher prices for all types of products (branded, unbranded, and speciality). The study also highlights the difference between the short term impacts which operators (farmers, importers, logistic companies) are already risk managing with mitigation measures; versus long term effects which will alter substantially trade flows and supply chains.
There are a few immediate recommendations which come through the discussions with stakeholders, including possibility for extending the transitional period for products categories most at risk; avoiding blanket application of tariffs and seeking exclusions for specific products; and applying procedures with leeway so dairy does not get stuck at border.