Brexit added almost £6 billion to UK food bills in the two years to the end of 2021, with the poorest households worst affected
The Guardian reports that in the two years leading up to the end of 2021, UK food bills went up by £6 billion.
This is a result of the red tape and extra costs associated with imported food, which added nearly £210 to the average household UK food bills over 2020 and 2021, London School of Economics (LSE) researchers noted.
LSE illustrated how poorer households were worst affected. This is because low-income families tend to spend a greater share of their income on food, and so inflation is felt disproportionately higher by them.
Basic products hit a record high of 12.4%
The British Retail Consortium trade body has just revealed that UK food price inflation hit a record high of 12.4% in November as the price of basics such as eggs, dairy products and coffee rose.
Researchers at the Centre for Economic Performance (CEP) at the LSE studied micro data-tracking trade flows and consumer prices for food products in the UK to identify the transfer of the cost of Brexit red tape to householders.
‘We find that leaving the European Union increased the price of food products by 3% a year, leading to a 6% increase over a two-year period’
“We find that leaving the European Union increased the price of food products by 3% a year, leading to a 6% increase over a two-year period,” the report stipulates.
It may sound shocking but it has been calculated that Brexit has cost the food market a monumental £5.84bn. On an individual basis, this equates to £210 per household.
The overall cost of living increase for the poorest households was 1.1% – 52% more than the 0.7% rise felt in the top 10% of wealthiest households, CEP found. This is a direct result of the Brexit-induced price rises.
In 2015, 77% of food imports were from the EU
After the December 2019 election, there was a sudden and immediate rise in UK food bills from the EU as businesses reliant on products and ingredients “immediately began to pass on to consumers” the cost of customs administration staff and other Brexit staff, the report says.
Regulatory costs varied according to product, with fresh red meat products identified as having a high “non-tariff barrier” (NTB) cost because of the paperwork required. On the other hand, vegetables such as onions, carrots and broccoli had close to zero NTB cost.
Researchers stated that price rises on products with high NTBs with little significant cost for products in the low or zero NTB categories.
CEP explained the EU single market was a “deep” trading bloc that eliminated tariffs and regulatory differences on food standards, which allowed for frictionless trade between member states, including the UK before Brexit.
Lord Frost’s Brexit trade deal signed at the end of the transition period in December 2020 may have ensured that trade is tariff-free with the EU but it did cause other problems. It created trade barriers in the form of customs, rules of original paperwork and regulatory standards checks for agri-food products.
“In leaving the EU, the UK swapped a deep trade relationship with few impediments to trade for one where a wide range of checks, forms and steps are required before goods can cross the border. Firms faced higher costs and passed most of these on to consumers,” explained Richard Davies, a professor at Bristol University and co-author of the report.
UK experiencing highest inflation in 40 years
Davies demonstrated how the rise in non-tariff barriers (NTBs) for trade with the EU had contributed to the 11% inflation the UK is experiencing, the highest in 40 years.
Domestic products and consumers
Are they any benefits of Brexit? The report does note that Brexit benefitted domestic food producers who are now faced with much less competition from European imports.
But it added: “The gains to domestic firms are outstripped by the loss to domestic consumers by more than £1bn. Additionally, unlike regular tariffs, NTBs do not generate any revenue for the government.”
‘Non-tariff barriers are an important impediment to trade that should be a first-order concern’
Nikhil Datta, assistant professor of economics at Warwick University and a co-author of the study, concluded: “The policy implications are stark: non-tariff barriers are an important impediment to trade that should be a first-order concern, at least on a par with tariffs, for policymakers interested in low consumer prices.”
