No-deal Brexit would leave UK in mozzarella deficit
Under a no-deal Brexit scenario, the UK would face the EU common external tariff on any exports sent to the EU. For mozzarella, this means a tariff of €185.20/100kg, approximately 45% of the value of the product. As a result, the majority of UK mozzarella would be unable to compete on EU markets.
However, the proposed import tariff rate for fresh mozzarella is zero. Therefore the impact on imports and exports is likely to be significantly different.
In 2018, the UK imported 48,000 tonnes more mozzarella than it exported leaving the country in a mozzarella deficit. However, over the last three years, exports have increased more quickly than imports, gradually reducing the trade deficit. Yet in monetary terms, the UK’s trade position has worsened.
Over the last couple of years, the difference between the value of imports and exports has narrowed. In 2016, the average unit export price was £1,540/t more than the price of imports. In 2018, the difference narrowed to just £300/t.
Nearly all of the UK’s mozzarella is sourced from the EU, with around 40% sourced from Denmark. Imports have declined from France, Germany and Ireland since 2015 and shifted towards Belgium, Italy and the Netherlands.
Despite tariffs on exported mozzarella only, a no-deal will still likely impact trade in both directions. Some food service companies are already making changes in preparation for Brexit. ASK Italian and Zizzi’s, both part of the Azzurri Restaurant group, recently switched sourcing product from Italy to Wales over concerns of a disrupted supply chain.
In simple terms, if trade stopped entirely, the UK would have a 48k tonne deficit of mozzarella. Producing this domestically would need around 472 million litres of milk; or 3% of national milk production, and the UK simply does not have enough processing capacity.
Without an export home to go to, the product that would have traditionally been exported could enter the domestic market. However, with competition remaining from imports, domestic prices could be put under pressure.
Limited spare processing capacity means the UK can’t produce all the mozzarella required to be self-sufficient. However, under no-deal, UK exporters could find they have no home for their cheese, while product is still entering the UK market from the EU. Such circumstances could have a significant detrimental impact on UK mozzarella manufacturers.