Attention Britain: Your Fruit From Spain Is Going to Get PriceyBy and
Exchange-rate movements and tariffs likely to increase prices
IFS report adds to mounting concerns over food security
British households are in for a rude awakening when they see just how expensive their oranges from Spain and their artichokes from France will become with Brexit.
That’s the warning of the Institute for Fiscal Studies in a report about what leaving the European Union will mean for the grocery bills of families already struggling with stagnant wage growth and declining living standards.
About 30 percent of food sold in the U.K. is imported, and 70 percent of that comes from the European Union, according to the IFS. Currency moves or changes to tariffs will therefore “directly affect the cost of getting imported food products onto supermarket shelves,” said the report authors, Peter Levell, Martin O’Connell and Kate Smith.
What’s more, changes are likely to hit lower-income households the hardest as they spend a higher proportion on food. The poorest 10th spend 23 percent of their income on food compared with 10 percent for the highest earners, the IFS said.
The pound’s 12 percent decline since the Brexit referendum has already boosted U.K. inflation the fastest in four years. Food prices, which had been restrained by a long-running supermarket price war, have also begun rising again on a year-on-year basis.
According to the IFS, sterling’s depreciation in 2007 and 2008 led to an 8.7 percent increase in the price of food relative to other goods, though it’s “still too early to tell” whether the weakening since the Brexit vote will have a similar effect, it said.
The impact that leaving the EU will have on food prices is “highly uncertain” given the range of new arrangements, from remaining in the single market and customs union, to striking a free trade deal or reverting to WTO rules. The last option could mean substantial tariffs on food imports both from the EU and even countries outside the bloc.
The research adds to growing concerns that Brexit risks hurting food security and standards in the U.K. through reduced supplies, volatile prices and lower safety regulations. The government faces replacing thousands of pieces of EU rules related to food and could lose access to overseas labor, something many farms rely on. That could mean a higher cost of production for domestic products.
Those issues were in the spotlight this week as U.K. Trade Secretary Liam Fox discussed a potential post-Brexit trade deal with the U.S. in Washington. Trade experts have warned that the Americans have more experience in negotiating agreements and could bulldoze the U.K. on issues such as chlorine-washed chicken, beef containing growth hormones and genetically-modified crops.