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The likelihood of a no-deal Brexit is becoming increasingly apparent as the UK’s negotiation deadline of 15th October looms. Despite recent talk that a no-deal scenario wouldn’t be all that bad for consumers when the Brexit transition period ends on 31st December, the implementation of tougher checks on goods, the introduction of tariffs, and reduced availability of products suggest otherwise. So how might a no-deal Brexit affect food prices and how can independent retailers prepare?
What to expect
Tensions are high between Brussels and Britain, and with the UK planning to overrule parts of the Withdrawal Agreement, which would be a breach of international law, Brussels is making its own threats in retaliation.
It could result in steep tariffs on agricultural goods entering Northern Ireland from Great Britain. What’s more, the UK could soon be paying tariffs on EU food imports, leading to an increased cost on products like tomatoes and cheese.
According to the British Retail Consortium’s Fair Deal for Consumers report, the UK imports half of its food each year, and 30% of this comes from the EU, so a restriction on goods from the continent could have a huge impact on retailers and consumers.
As per the schedule of tariffs published in May, roughly 85% of EU food imports will be hit with tariffs. BRC estimates that the average tariff would be higher than 20%, which could jump to over 40% for beef and cheese.
The impact of tariffs will certainly vary across a range of products, depending on different factors. With the UK officially leaving the EU on 1st January, it comes at a particularly challenging time when imports make up an even greater proportion of our food. During the winter months, 90% of our lettuce, 80% of tomatoes and 70% of soft fruit are imported, the vast majority coming from the EU.
Throughout the coronavirus pandemic, there has been an increased focus on the UK’s supply chain, and the need for the country to become more self-sufficient when it comes to food. With many agricultural products imported throughout the seasons, it’s inevitable that we’ll see a hike in prices on these goods. Supply chains may also be further disrupted in the event of a no-deal Brexit due to new border checks, putting additional pressure on availability and prices.
Finding a balance
Given the competitive nature of retail and thin margins faced by retailers, it’s likely that these increased costs will be placed on the consumer. The potential rise in prices comes at a challenging time for retailers and consumers alike, with the coronavirus pandemic having had a major impact on consumer spending and the economy as a whole.
It’s been a difficult year in terms of sales, and many consumers will likely still be on a tight budget heading into Christmas and the New Year.
But it’s not all doom and gloom: consumer trends that we’ve seen emerge as a result of COVID-19 and lockdown means consumers may still be willing to spend on food, but their priorities may simply have shifted. We’re seeing an increased focus on shopping locally and supporting small business – great news for indie retailers. Many consumers have also been cooking at home more and experimenting with new ingredients, and if further restrictions are placed on foodservice outlets, we could see grocery sales increase even further.
So how can retailers prepare? While some multiples like Morrisons have announced their biggest ever round of price cuts ahead of Christmas, it seems there’s an increasing focus on value and price. For independent retailers, this could mean an increased focus on provenance, telling a story around products to showcase their value, and offering a more personalized service to offer customers greater value for money.
Despite concerns around delays on imported goods, retailers will no doubt find it challenging to stockpile in advance of Brexit, given the preparations of Christmas and the New Year, coupled with uncertainties surrounding COVID-19 restrictions. But given the nature of independent retail, many may find it beneficial to work ever closer with local suppliers, supporting British farmers and producers and championing British produce.
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