The biggest dairy in the world is to be be built near London as the consolidation of the milk market continues.

Arla Foods, the Danish producer that processes 28 per cent of Britain’s milk, will build the processing plant, which will handle one billion litres of milk a year and will be operational in 2012. It will create about 500 jobs and cost Arla more than £70 million. The exact location is as yet undecided. The company said that it was operating at full capacity in its other plants.

About five billion litres of milk are consumed in Britain every year. About 90 per cent of this is sold to retailers by three companies: Arla, Robert Wiseman Dairies and Dairy Crest.

Dairy Farmers of Britain, a smaller business, collapsed in June after losing much of a lucrative contract with the Co-operative Group. Robert Wiseman yesterday reported an 81 per cent leap in profits to £21 million in the six months to October 3 after winning business from Dairy Farmers.

The dairy industry has suffered over the past few years as milk prices have oscillated and the costs of packaging and transport have risen. Dairy Crest predicted last week that the price of raw milk would rise again in the next few months, while Robert Wiseman said yesterday that the cost of oilrelated items such as plastic for bottles and diesel was also rising.

The market is static, with growth of 0.6 per cent in the year to October 4, forcing the companies to focus on more efficient production to increase profits and gain market share.

Robert Wiseman plans to increase the amount of milk produced at its Bridgwater dairy from 250 million litres to 375 million litres a year.

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