What could Brexit mean for food prices?

08 December 2020, 08:40 AM
  • The food and drink sector remains unclear about how Brexit will impact business, but research shows a no deal exit could lead to price rises for fruit and vegetables
What could Brexit mean for food prices?

As talks between the UK and the European Union continue in a last-ditch effort to reach a post-Brexit trade deal, business leaders across Britain’s food and drink industry remain unclear on the impact that Brexit will have on their business.

New research from Lumina Intelligence has found that 56% of retailers are unclear about the impact of Brexit on their business over the next year. Just three in 10 said they had clarity on what Brexit means for them.

“We need to prepare… but don’t know exactly what to do, and time is running out,” an unnamed retailer said in response to the survey.

No-deal Brexit would raise fruit and veg prices
Import tariffs were found to be the top concern from grocery retail and foodservice businesses, with questions remaining around the additional costs that may be incurred from cross border tariffs and availability of goods from the European Union.

In fact, a recent briefing paper found that new trade tariffs that would apply under a no-deal Brexit would increase the price of fruit and vegetables in the UK by an average of 4%.

The Food Foundation and SHEFS found that if tariff increases are passed directly on to UK consumers, the average British family would pay 4% more for their fruit and vegetables from 1st January 2021. Under an EU Free Trade Agreement, they said the increase would be only 0.6%.

“In the event of a no deal Brexit, imports from the EU would automatically be subject to new UK ‘Most-favoured Nation’ tariffs. In addition, imports from non-EU countries may also be subject to increased tariffs,” the groups explained.

Prices for some products could rise by even more. Tomatoes, for example, would become 9% more expensive under a no-deal Brexit. Lettuce, citrus fruits and grapes were also above the average.

For a family of four, this would mean an increase of £25 to £28 a year, although the groups point out that if families increased their consumption to the recommended five-a-day this would cost £65 per year more for a family of four.

“Other food categories would also be subject to increased tariffs in a no deal Brexit scenario, further driving up household grocery bills,” they said.

What’s more, Dr Paraskevi Seferidi of Imperial College London said the actual impact could be even larger. “Extra costs that are not taken into account in our analysis, such as transaction costs due to border checks, could further exacerbate the estimated effect.”

“Nightmare scenario” for trade
Brexit is also causing issues for food and drink businesses that move their products over the Irish border. In fact, four in 10 food and drink businesses told the Food and Drink Federation that they would stop or reduce supplies going to Northern Ireland because of Brexit.

More than 20% of suppliers said they would pause deliveries to Northern Ireland “to ensure we can be legally compliant with NI rules”, while nearly 12% said they would stop supplies “while we assess if it remains a viable market”, according to a report in the Guardian.

Meanwhile, the Independent reported that Marco Digioia, secretary general of the European Road Haulers Association, warned of a “nightmare scenario” that could lead to months of food shortages in the UK due to delays at the border.

“You can expect empty shelves in supermarkets from the first week of 2021,” he said. “It’s a complete nightmare scenario. It will last for weeks, even months.”

“Brexit has caused a great deal of uncertainty and concern to businesses across the UK food and drink industry for some time,” said Sarah Coleman, insights and communication director at Lumina Intelligence.

With the Brexit transition period coming to an end on 31st December, the UK and EU are still yet to reach a deal. While a spokesperson for Prime Minister Boris Johnson says Britain is “prepared to negotiate for as long as we have time available”, Michel Barnier, the EU’s chief negotiator, has said a deal must be made this week.

After talks on Monday, the UK and EU released a joint statement that said conditions for finalising an agreement are “not there due to the remaining significant differences on three critical issues: level playing field, governance and fisheries.” Talks will continue in the coming days.

“Due to the significant impact of the coronavirus pandemic, it is understandable that focus has shifted to fighting the immediate challenges,” Sarah added, “but the Brexit deadline is looming and businesses need clarity on how they will be impacted and how best to prepare for this.”

For government information on how food and drink businesses can prepare for Brexit, click here.

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