Dairy prices, such as cheese and milk, could drastically increase if the UK does not forge a transitional agreement to save imports and exports from World Trade Organisation tariffs.
The UK's largest milk producer Arla will today say that WTO tariffs, which equals 36%, could hit the UK hard after it leaves the EU.
The co-operative, owned by 12,000 farmers across seven European countries, will also release a Centre for Economics and Business Research study showing that its UK business has a total economic footprint of £6bn a year in gross value added and can be associated with 119,000 jobs.
The co-operative, which has 2,485 British farmer owners, has annual UK revenues of £2.2bn, 29% of Britain’s dairy manufacturing market and nearly 3,500 workers.
'Significant consequences'
Tomas Pietrangeli, managing director for Arla UK, told The Telegraph: “The biggest risk we see is not having free movement of goods, which we think will have significant consequences not only for Arla but for the total dairy industry.
“If we move into a hard Brexit and there is no transitional agreement in place, that would have potentially bigger implications than those just for us as a company. It is generally a low-margin business so 36pc tariffs pretty much closes exports and imports. If you look at dairy exports and imports in the UK, there is a deficit of 25pc.
“There is neither the milk nor the capacity in the UK to supply the population with their need of dairy products, which has potential implications in terms of food inflation, supply and quality.”
UK milk at UK sites
Mr Pietrangeli said the vast majority of products made at its 15 UK sites are from UK milk.
Its exports from the UK, however, have grown by a double-digit percentage over the past two years.
Arla UK now sends goods to 69 countries, exporting UHT milk to China and shipping Cheddar cheese to a number of markets. Its imports include Lurpak butter from Denmark.
Mr Pietrangeli said the loss of EU subsidies is also a “significant risk” to UK dairy farming.
