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The dairy sector and Brexit: the consequences

Brexit, i.e. the departure of the United Kingdom from the EU, raises questions about the future for both the UK and Europe. And the issue is not purely financial as immediate problems may regard the markets, particularly the agricultural and food sectors and therefore also the dairy sector. The UK, in fact, does not produce all the milk it requires; according to data from 2015, it produced 88% of its milk requirements in 2015 and 90% in the first few months of 2016. Today the future remains full of uncertainties as far as Brexit and the dairy sector are concerned.

Some of the main dairy products imported into the UK include cheese, comprising sheep milk cheese, which amounted to 494,000 tonnes in 2015 for a turnover of €1,803 million, and butter, with 106,000 tonnes for a value of €363 million.

The main suppliers are EU countries, first and foremost Ireland, which supplies 22% of the cheese purchased by the UK and 62% of the butter. In addition, the market is free of customs duties.

EU membership binds the UK to levy customs duty on imports from Oceanian countries, such as Australia and New Zealand. With the departure of the UK from the EU this import duty will no longer exist and could encourage trade between the UK and the two member states of the Commonwealth, also by virtue of their historical relations.

In such a scenario, if the price differences between Oceania and Europe remain as they are, the UK could find it more convenient to import products from Australia and New Zealand.

The EU countries could therefore feel the effects of the UK’s departure to a greater degree, in particular neighbouring Ireland. On the one hand it is the UK’s main supplier of cheese and butter and, on the other, the UK represents its main export market for these two products. The British exit from the EU will therefore have very negative consequences on the Irish economy.

Also, UK exports to EU countries – to date in the order of Ireland, France and Germany – will be subject to customs duty unless bilateral agreements are signed.