Brexit: UK households could face ‘considerable and unpredictable’ fluctuations in food prices, says IFS

Tariffs would raise the price of food imported from the EU, which accounts for 70 per cent of the UK’s gross food imports

Ben Chapman
Thursday 27 July 2017 16:50 BST

UK households could face “considerable and unpredictable” fluctuations in food prices after Brexit thanks to increased trade barriers and a weak pound, according to a think tank.

The Institute for Fiscal Studies said that the future of food prices will remain “highly uncertain” until the outcome of trade negotiations is known.

If no free trade deal between the UK and the EU is agreed before the March 2019 divorce date, the UK will trade under World Trade Organisation (WTO) rules. In this scenario food prices are likely to rise “significantly”, according to the think tank.

It pointed out that the UK would not be able to set tariffs that discriminate between its various trading partners, except as part of a free trade agreement or to give developing countries special access to its market.

This means the the UK would have to place tariffs on EU imports unless it chose to charge zero tariffs to all WTO members - an option which is seen as highly unlikely.

Tariffs would raise the price of food imported from the EU and the bloc accounts for 70 per cent of the UK’s gross food imports, the IFS said.

Food will be more vulnerable to tariff increases than other sectors because around 30 per cent of the value of food purchased by households in the UK is imported, compared to just 17 per cent of overall consumer spending, according to the IFS’ figures.

The UK could mitigate the effects of tariff barriers by accepting cheaper food imports that do not meet current EU standards, it said.

However, the recent backlash against the prospect of chlorine-washed chicken and hormone-injected beef from America, suggests that this may be politically unpalatable.

The effect of the weak pound has not yet filtered through to shop food prices but it is likely to do so in future, the IFS said.

It looked at the last major sterling devaluation which occurred between the beginning of 2007 to the end of 2008, when the currency depreciated by 21 per cent. Over the same period, prices overall rose by 6 per cent, but food prices jumped 15 per cent. Though other factors were at play, this demonstrates the sensitivity of food prices to exchange rates, the IFS said.

The poorest households spend a higher proportion of their income on food, so will be hardest hit by price increases, the think tank said.

Join our commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies


Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged inPlease refresh your browser to be logged in