letsstaytogether.org.uk

How will Brexit Affect Food Prices?

Foods payment list

Discussions about the effect of Brexit on food prices have been circulating for months, linked to the availability of some foods as well as security for growers. Brexit secretary Dominic Raab, currently running to be the leader of the Conservative Party and next Prime Minister, has said Britain would have “adequate food supplies” after Brexit. However, not everyone is convinced. Currently, the UK imports about 30 per cent of its food from the EU and another 10 per cent from the rest of the world. In the lead up to Brexit, questions have also been raised about how food will safely cross the borders.

Determining food prices

The price of food is determined by many things, not least the weather. However, in relation to Brexit, there are three political actions that may affect UK food prices. These are tariffs, the value of sterling and the transportation of food across borders

Tariffs

Leaving the EU on World Trade Organisation (WTO) terms in the event of a no-deal Brexit would leave British families to bear some of the cost of steep tariffs on everyday goods, while businesses absorb some to remain competitive. Tariffs are simply a tax paid by businesses on imported goods. Different tax rates apply to different products. The tariff for a particular product is the same for every country until there are trade agreements, which means new tariffs.

The average WTO tariffs translate into price rises for UK consumers by the following figures: dairy products to rise by about eight per cent; meat by just under six per cent; oils and fats by almost eight per cent and vegetables by four per cent. Other tariffs are much smaller, with tea, imported from outside the EU, taxed at 0.86 per cent.

Within the UK, claims keep resurfacing that the World Trade Organisation’s Article 24 could soften the economic blow of a “no deal” Brexit, but this has been thrown out by trade lawyers as a misrepresentation and as “nonsense”.

The UK has already announced that it will not remove tariffs on some food imports, to protect UK farmers being put out of business by cheap imported food. Tariff rates still need to be agreed as part of the Brexit deal, which should balance the interests of consumers for low food prices with the security interests of farmers and growers.

UK shoppers could choose to buy British, but by March, the UK imports 80 per cent of its tomatoes and 70 per cent of soft fruit from the European Union.

Exchange rates

When the value of the British pound falls against other currencies, it becomes more expensive to buy from abroad, which directly affects the cost of importing food. At the time of the global financial crisis of 2007-2008, sterling depreciated by 21 per cent which caused food prices to rise by almost nine per cent, though the increased cost of fuel and fertiliser also played a part in the increased costs, the depreciation of sterling was considered the major factor by experts. Already, the fall in the value of sterling since the Brexit referendum has led to a small hike in food prices in the UK.

Non-tariff barriers

Non-tariff barriers simply mean extra checks at ports. These can cause delays and shorten the shelf-life of some foodstuffs, as well as being an additional cost to businesses. Delaying a lorry by one day at a port can cost a business between GBP500-850 (EUR600-1,000) according to consultancy firm KPMG.

Conclusion

Food buyers in the UK agree that the price of food will rise after an increasingly likely no-deal Brexit. However, what remains unknown is the degree of price rises, which will depend on trade tariff negotiations and the conditions for border checks on EU imports. This raises the issue of food security in the UK, which has a record of decline in food self-sufficiency that began three decades ago. In the 1980s, the UK produced 74 per cent of what it needed to feed itself. Today the figure is 60 per cent.

The National Farmers Union sees the potential for the UK to increase levels of self-sufficiency by maximising foods that can be produced well in the UK and which will deliver a range of economic, social and environmental benefits to the country. Even domestic-grown and produced foodstuffs will not be immune from the negative impacts of Brexit. British agriculture currently relies heavily on EU subsidies that allow farmers to make a living from their trade. Without these subsidies, dairy and vegetable production could become unsustainable.

In the meantime, some retailers are looking at tinned grocery items as a substitute of fresh foods, rather than stockpiling before Halloween, a strategy that did not go to plan prior to the original leave date of 29 March 2019.