Brexit: How much will food prices rise if UK does not agree a deal with the EU?

Producers have warned of sharp increases resulting from additional tariffs, border checks and a weakened pound

Ben Chapman
Monday 25 February 2019 08:16 GMT
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Food prices are set to rise sharply if the UK crashes out of the EU with no trade deal in little over a month. But how much might shoppers be affected by increased tariffs, border checks and a weaker currency?

Business groups have issued a series of dire warnings in recent days over how much more expensive food shopping will become after Brexit.

The impact will vary across different ranges of products and depends on a number of factors such as how dependent the UK is on imports rather than domestic supply and the import taxes that will be applied by the UK government.

Producers are likely to pass on additional tariffs to retailers and ultimately to customers but these vary considerably. Birds Eye’s UK and Ireland boss Wayne Hudson said that for his business, additional tariffs will range from 2 to 20 per cent, which he said will almost immediately be passed on to customers.

Border checks

Delays at at the Channel ports are also set to add to costs because of mandatory EU checks on people and goods entering the EU from the UK. This will affect both imports and exports at Dover and Folkestone because of the "frequent and closed loop nature" of the crossings, the Cabinet Office has said.

Half of the UK’s food arrives through Dover and Folkestone, and during spring Britain is particularly dependent on imports of fresh fruit and vegetables because many are out of season in this country and must be imported from warmer climes.

At this time of the year, around 90 per cent of lettuces, 80 per cent of tomatoes and 70 per cent of soft fruit is sourced from, or delivered via, the EU.

A statement issued by the Cabinet Office in December said that in a worst-case scenario, “there will be very significantly reduced access across the short strait [between Dover and Calais] for up to six months”.

Despite Transport Secretary Chris Grayling's assurances that ports are ready for disruption, plans for additional ferry routes to ease congestion have not been successful, with only a fraction of the hoped-for capacity secured.

Exchange rates

Exchange rates are also likely to add to food costs if no withdrawal agreement is ratified. Economists forecast that the pound will fall sharply in the event of a no deal meaning less purchasing power, making imports more expensive. Much of this will filter through to higher prices on the shelves.

Tariffs

It is not yet possible to quantify the exact effects of additional tariffs. We will know more after the Department for International Trade publishes a list of new import taxes that will apply to more than 5,200 products, including food.

The EU imposes relatively high tariffs on some food products in order to protect European farming and food supplies. For dairy, the average tariff is more than 35 per cent while for some meat products, such as lamb, it is more than 40 per cent.

A number of hard-line Brexiteers have advocated unilaterally slashing UK import duties to zero in order to reduce prices for shoppers. Such an approach could mean lower prices for some products.

But the zero-tariff approach has been ruled out by environment secretary Michael Gove because it is likely to have a disastrous impact on UK farmers. They have developed their businesses in the context of the EU’s customs union but would suddenly have to compete with cheap imports from around the world, including from countries which apply lower food standards that the UK.

“One thing I can reassure you it will not be the case that we will have zero-rate tariffs on products, there will be protections for sensitive sections of agriculture and food production,” Mr Gove told the National Farmers’ Union conference last week.

Zero tariffs would not only hurt the UK food industry. Ceramic producers have warned that 22,000 jobs could be at risk from inexpensive imports, particularly from China.

WTO rules

If the UK leaves the EU without a deal trade would fall back on World Trade Organization rules.

This could mean for example, a 46 per cent tariff on mozzarella, 40 per cent on beef, 21 per cent on tomatoes and 15.5 per cent on apples, the British Retail Consortium has said.

Every WTO member has a list of tariffs and quotas that they apply to other countries. While the average EU tariff is quite low, for food it is often relatively high.

While the UK can lower its tariffs, under the WTO's “most favoured nation” rules, it has to offer the same raxes to every member around the world unless it has agreed a trade deal with them.

So far, International Trade Secretary Liam Fox has only been able to secure deals with a small fraction of the UK’s trading partners.

Analysts at Retails Economics predict that the cost of staples like beef and tomatoes could soar, with an extra £9bn added to the overall cost of food for UK consumers.

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