Yahoo Finance No-deal Brexit could push up food and drink costs by £3bn
A no-deal Brexit could push up food and drink prices by £3bn ($4bn), shopkeepers have warned.
The British Retail Consortium (BRC) said on Friday that a failure to secure a trade deal with the EU could push up the price of food and drink imported into the UK by £3.1bn. Rising costs would come due to tariffs that would kick in if the UK and EU fail to agree a trade deal.
Four-fifths of the UK’s food imports come from the EU and 85% that trade would face tariffs, the BRC said. The average tariff on food imported from the EU would be 20%. Supermarkets would likely have to pass that cost on to customers given the slim profit margins in the sector.
“With just weeks to go, it is alarming that there has still been no deal agreed with the EU, putting customers in line for a £3bn tariff bombshell,” said Andrew Opie, director of food & sustainability at the BRC.
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The UK and EU have set a deadline of Sunday (13 December) to conclude trade deal talks that have dragged on all year. Prime minister Boris Johnson’s trip to Brussel on Wednesday failed to break the stalemate in talks, with “very large gaps” remaining between the two sides.
If a deal can’t be reached, the UK will fall back on WTO terms to trade with the EU when the current transition period ends on 31 December. That would mean taxes on imports from the bloc.
The chairman of Tesco (TSCO.L), Britain’s biggest supermarket, warned earlier this week that a failure to agree a deal would likely lead to higher prices at the tills.
“There will be tariffs and those tariffs can be quite substantial on some food items, inevitably leading to higher prices,” John Allen told Bloomberg TV. “That’s unavoidable.”
READ MORE: UK tomato, lettuce, and lemon prices set to soar under no-deal Brexit
Allen said prices would rise by an average of 3% to 5% but could be as high as 40% for some items, such as French cheese.
A study published earlier this month by global research programme Sustainable & Healthy Food Systems (SHEFS) estimated that fruit and vegetable prices would rise by an average of 4% under a no deal Brexit. Everyday items such as tomatoes and citrus fruits faced the highest price rises.
Even if a deal is struck, experts believe disruption to trade is likely given traders and customs officers will have to adapt to new systems, some of which have let to be tested or agreed upon. Disruption to trade flows could lead to shortages or high prices.
“Retailers are doing everything they can in time for 1st January, but no amount of preparation for retailers can entirely prevent disruption to food and other essential goods that come from or through the EU,” said Opie.
“With negotiations entering the 11th hour, protecting UK and EU consumers from billions in tariffs must be the top priority.”
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