The UK agricultural sector has been struck hard in recent months as bird flu and floods have both taken their toll. But Britain’s new burden in the foot-and-mouth disease could leave permanent scars. According to Deloitte, the business advisory firm, the health of UK's livestock industry is almost at breaking point and price rises are on the cards.

Richard Crane, food and agriculture partner at Deloitte, said: “A combination of factors is threatening the survival of the UK livestock industry. The rising price of wheat and soft commodities are compounding the negative impact of foot and mouth on the UK to a much greater extent.”

Many producers are facing almost 100% price rises in feed costs – the largest cost in producing livestock. Looking ahead production is unlikely to be viable without price rises. The UK is in need of a way forward and the answer can be found in sustainable prices.

Crane added: “Consumers hold the key to a more resilient future. UK shoppers will have to pay more for their meat. Increased prices will allow farmers to continue to meet the increasing demand for local, high quality meat.

“This is likely to be the inevitable cost of securing and also safeguarding the future of UK meat production. Without it, the opportunity to enjoy home-grown quality produce and British meat could become a rarity on supermarket shelves.”

Repercussions could linger once foot and mouth has gone. Vaccinations of animals are likely to be introduced to ensure no further outbreaks occur. Countries that are foot-and-mouth free do not want imports of fresh meat from those tainted with outbreaks because of the danger they may still carry the disease.

Crane said: “If foreign markets close their doors to UK meat exports there could be cause for concern. The export of animal by-products, i.e. the subprime cuts which are exported to maximise returns, will not be available. The upshot is reduced returns to the farmers and the processors which could hurt the UK’s £493m-a-year meat export industry.”

“The fall in UK meat production and subsequent product exports could also make way for the UK’s foreign meat-producing competitors, to ramp up their production efforts and sustain a competitive edge over the UK. The longer the export ban remains in place, the longer our overseas markets become harder to re-establish.”

In February 2007 major UK supermarkets announced relatively low impact of bird flu on sales of meat. Sainsbury's and Morrisons reported a 10% week-on-week drop across all fresh and frozen poultry products and Sainsbury's said sales of its own-brand poultry products were down 5%.

Crane said: “Should consumption levels of British meat drop there is a risk of job losses amongst producers and processors. When a food safety crisis strikes, consumer confidence often bounces back to pre-outbreak levels if agencies and government action is swift and decisive.”

“The UK’s meat business has suffered a major blow. The meat business came close to a complete standstill. The recent lift of the movement ban means meat processors can resume production and retailers are after a period of much diminished supplies able to resume the supply of British produced meat.”

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About Deloitte
In this press release references to Deloitte are references to Deloitte & Touche LLP, which is among the country's leading professional services firms. Deloitte & Touche is the United Kingdom member firm of Deloitte Touche Tohmatsu ("DTT"), a Swiss Verein whose member firms are separate and independent legal entities. Neither DTT nor any of its member firms has any liability for each other's acts or omissions. Services are provided by member firms or their subsidiaries and not by DTT. Deloitte & Touche LLP is authorised and regulated by the Financial Services Authority. The information contained in this press release is correct at the time of going to press.