Supplementary memorandum submitted by
Mr Kevin Hawkins, Director, British Retail Consortium (X21[b])
If the session had not been prematurely concluded,
I would have said something along the following lines:
An outright prohibition on caged production
in the UK will dramatically reduce the output of eggs and result
in a corresponding increase in their price. Prices will rise because
production costs will increase. Free range production is clearly
far better for the animals but productivity levels are far lower
due to the loss of scale economies. As a result, cheap imports
will flood in to fill the gap. The UK eggs industry will shrink
in much the same way that our pig industry has done over the past
five years but probably to a much greater extent. British eggs
will become an up-market, niche product.
The effects of adopting enriched cages will
depend on how much time the industry is given to make the necessary
investment, as I started to explain in my answer to Q112. Enriched
cages will reduce productivity levels and both this loss of technical
efficiency and the investment involved will increase the industry's
costs. As its operating margins are typically small this will
increase the supply cost to retailers, who will either try to
absorb the increase or pass it on to consumers or achieve some
combination of both. This will in turn increase the level of imports,
although not to the extent that will occur if caged production
is prohibited. The combined pressures of a rising cost base and
growing import penetration will force UK egg producers to achieve
greater scale economies, which means greater concentration through
mergers and acquisitions. There will, of course, be a gain in
animal welfare but most consumers buy a commodity product like
eggs primarily on price and value. Once again there are very close
parallels with the pig industry. The more notice the industry
has, however, and the longer the transitional phase, the less
disruptive the introduction of enriched cages will be.
The conclusion, therefore, is—as I said
in Q112—that the sooner DEFRA makes a decision one way or
the other, the better.
3 July 2003
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