New analysis from the BRC stressed that, with over three-quarters of food imports to the UK originating in the European Union, “most of these goods” could be subject to new tariffs.
If a new trade agreement is not reached and the trading relationship between the UK and EU falls back to World Trade Organisation tariffs when the country exits the EU in 2019, the average cost of foods imported by retailers from the EU would increase by 22%, the BRC suggested.
The BRC said that – based on the proportion of European food sold in the UK – the impact will be “considerable” if UK producers react to higher input costs by pushing their own pricing up to bring it into alignment with imported prices.
“Price increases of this scale to everyday food items will add a huge burden to hard-pressed consumers whose finances are already under increasing strain from inflationary pressures,” Andrew Opie, director of food policy, observed.
The BRC’s latest shop price index reported food price inflation of 1.3%.
“Even at the lower end of the risk, price rises of 5% to 9% dwarf the increase from inflation that shoppers are currently paying on food goods. And the tariffs are particularly high on meat and dairy products, meaning that products such as beef and cheese would be hardest hit. With consumers’ buying habits being dictated ever more by a shrinking pool of discretionary spend, there’s no doubt that they will find an additional hit of this magnitude to their weekly food bills extremely hard to swallow.”
Beverages, fruit, vegetables, meat and fish are the UK’s biggest imports from the EU. Without the continuation of tariff-free trade, tariffs could be as high as 46% for cheese or 21% for tomatoes. This could push the price of cheese up by “more” than 30% while tomatoes could become 20% more expensive, the BRC predicted.
While the BRC noted that the Brexit process does open the door to trade agreements with non-European Union countries, the industry body stressed the need to avoid a “cliff-edge” for UK retailers and shoppers.
“There will be opportunities from new trade deals in the medium to long term, but there’s a pressing need to avoid a cliff-edge situation on Brexit day. This is why the priority for the UK Government has to be securing the continuity of free trade with Europe from March 2019 and thereby delivering a fair Brexit for consumers,” Orpie concluded.
The retail consortium is calling on the UK government to negotiate a continued tariff-free trade with the EU in order to avoid upward pressure on prices.
Government position
Despite a series of position papers setting out its ambitions for its relationship with the EU after Brexit, the UK government’s aims for food sector trade remain unclear.
London has wavered between suggesting “no deal is better than a bad deal” and conceding that an interim customs union would be advantageous to avoid a “cliff edge” for UK businesses.
Talks over the future trading relationship between the EU and the UK have failed to make significant headway, prompting repeated warnings from European Commission officials that the “clock is ticking” down to the date the UK will leave the EU in March 2019.
Negotiators from the EU have insisted that the financial severance package must be settled first, while the UK has taken the position that the so-called “divorce bill” and future trade should be discussed simultaneously.