A boost for UK/EU trade

The new “common understanding” between the European Union (EU) and UK government including a way forward on sanitary and phytosanitary (SPS) regulations (1), has been widely welcomed by the EU and UK dairy industries. However, experts on both sides warn “there is no deal yet” allowing a formal agreement to be drafted and signed, following the 19 May accord, and negotiations are continuing with no conclusion likely before next summer.

“To move things forward, the EU Council of Ministers must now endorse a formal mandate for the European Commission, paving the way for technical negotiations to finalise implementation” of a revised SPS framework and aligned rules on organics and marketing standards, European Dairy Association (EDA) director trade and economics, Laurens van Delft, told DII.

In a statement (2), EU food and drink industry association FoodDrinkEurope said that the agreement, assuming it is concluded, “will ease current trade frictions” between the UK and EU, being “each other’s most important trading partners,” noting that despite the erection of post-Brexit trade red tape and health checks, there was €43 billion’s worth of EU food and drink exports to the UK in 2023.

Also welcoming the move, EU dairy trade association Eucolait said combined dairy exports to and imports from the UK exceed €5 billion a year, “making the UK by far the EU’s most significant trading partner.” (3)

“If an agreement providing dynamic alignment of food safety rules is eventually concluded, it would significantly facilitate dairy trade in both directions,” Eucolait secretary general Jukka Likitalo told DII, noting Brexit has caused “about 20% decline of trade in both directions.”

A formal deal would make a bigger difference for UK exports to the EU, which are currently subject to full import controls, than for EU exports to the UK, given that most EU dairy products are classified as low risk by the UK and are thus not subject to health certification, he said.

“Indeed, small businesses are likely to benefit the most, as they have less resources to deal with the administrative burden,” he made clear.

And Likitalo said while “dynamic alignment” of rules should be the norm with no lowering of standards, “both sides should be able to take targeted action to protect their biosecurity and public health.” Ultimately, everyone will benefit, including consumers, as the cost of doing business across the Channel will decrease, he said.

“For the dairy sector, this initiative promises real benefits: fewer border delays, reduced red tape and renewed access for SMEs, for example small cheesemakers that stopped exporting due to costly paperwork,” said the EDA’s van Delft, also deputy secretary general of the European Whey Processors Association (EWPA).

“Faster, cheaper and more predictable logistics should revive two-way trade, particularly in premium and perishable products, while maintaining food safety and traceability standards through equivalence rather than duplication,” van Delft continued. “In addition, consumers stand to gain from fresher products and broader choice, and producers from lower compliance costs and simplified groupage.”

With Northern Ireland remaining in the single market post-Brexit, “The agreement would not only streamline trade processes, but also help dairy trade flows on the island of Ireland and facilitate smoother east–west and west–east dairy movements,” van Delft added.

“All in all, the agreement would not only enhance trade, but it would also reflect the broader spirit of EU-UK cooperation that continues across other key areas such as sustainability, scientific research, climate goals and food systems resilience.”

Devil in the detail

Dr Judith Bryans, chief executive of the UK’s dairy industry association Dairy UK, also welcomed the common understanding on SPS regulations as a “critical and welcome step forward for dairy trade.” But she said details needed to be discussed, with “all existing trade administration processes to remain until the agreement is finalised and implemented.

“It could reasonably be expected that the outcome could remove the requirement for dairy exporters to obtain export health certificates for exports to the EU…and consignments would no longer be subject to physical or documentary checks,” she told DII. “But this is all very much still to be negotiated.”

UK dairy companies strongly support the alignment of food standards. Simon Spurrell, director of Hartington Creamery of Matlock in the UK, said these commitments should have been included in the January 2021 Brexit deal, but the UK’s failure to do so meant many “British animal foodstuffs producers lost access to the EU market a long time ago.”

Indeed, he said [the then-incumbent Prime Minister] Boris Johnson’s hard Brexit deal meant nearly £250,000 (€289,800) of his company’s sales disappeared overnight, and he lost £600,000 (€695,532) of business in total.
“This alignment has the potential to streamline our processes by removing the necessity for extensive export documentation and associated costs of veterinary checks for each consignment,” he told DII, creating “significant savings for both small UK and EU producers.

“Currently, the average additional cost for exporting to the EU includes two to four hours of paperwork and a veterinary inspection whose cost averages £180 (€209). Moreover, each consignment is subject to inspection, which creates additional transport costs due to delays.

“For larger producers who often ship container loads of 26 pallets, these costs can be distributed across a larger volume, making them more manageable,” he said. “But smaller businesses often handle consignments of a pallet or even smaller, meaning they face the same overhead costs without the benefit of scale.”

Spurrell argued that consumers on both sides of the Channel would also benefit from a “Brexit reset” if and when in place, as “by working to reduce sales costs, we can create an opportunity for lower dairy prices.”

Robin Skailes, director at Nottinghamshire-based Cropwell Bishop Creamery, said Brexit had caused headaches with product shipments into Europe: “Cropwell Bishop used to sell its cheese direct to the consumer and now goes through a UK company that has warehouse space and a business in the Netherlands. It then invoices and distributes the product in Europe,” he told DII.
“Along with the extra paperwork, a baffling Brexit mandate also sees vets required to inspect every pallet order of cheese,” and as this hinders smaller cheese makers, “Stilton is now grouped together with other cheeses to ease the export burden,” said Skailes, who also chairs the UK’s Stilton Cheesemakers’ Association.

Such checks would reduce considerably, or potentially even disappear, when the deal is in place. Skailes, like Spurrell, also predicts the UK will align with EU traceability, animal welfare and food safety rules, after an agreement, albeit adding: “Our very high standards will be maintained.”
But he says the main loss of dairy business from the UK to EU was in single consumer shipments, “so a very small volume,” such as direct-to-consumer sales.

Indeed, showing the resilience and success of the industry in the EU and the UK, whatever the trading conditions, Skailes noted proudly: “We are selling more cheese into Europe now, but it has nothing to do with Brexit. It’s just that our cheese is more in demand throughout Europe.”

1. www.gov.uk/government/publications/ukeu-summit-key-documentation/uk-eu-summit-common-understanding-html
2. www.fooddrinkeurope.eu/resource/europes-food-and-drink-industry-hails-progress-on-eu-uk-trade-relations/#:~:text=With%20%E2%82%AC43bn%20of%20EU,with%20policymakers%20as%20discussions%20progress.

3. www.eucolait.eu/strengthening-eu-uk-dairy-trade-through-sps-alignment/