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Poorest U.K. Families Would Take Biggest Hit From No-Deal BrexitBy
Food, clothing among products that could see large price rises
Theresa May in Brussels this week for summit with EU leaders
Households already struggling to make ends meet will be the worst hit if the U.K. fails to agree a trade deal with the European Union.
The impact on the poorest of British households would be a third greater than on the richest, researchers at the Resolution Foundation and the U.K. Trade Policy Observatory said in a report Tuesday. Lower-income households spend a greater proportion of their income on products like food, drink and clothing, which would see the greatest price increases under new trade tariffs.
If the U.K. doesn’t sign a trade agreement with the bloc, it will face most-favored nation tariffs on imports from the EU as well as other partners under World Trade Organization rules. That would feed through to consumers: the cost of clothing could rise by 2.4 percent, dairy goods by about 8.1 percent and meat products by 5.8 percent, according to the report.
The average annual household’s consumption could therefore jump by 260 pounds ($345), and over 3 million families would see price increases of 500 pounds a year or more, the researchers said.
Living standards are already under strain, with consumers bearing the brunt of the pound’s fall since the Brexit vote in June 2016. The depreciation has pushed up inflation to 2.9 percent, and economists see it reaching 3 percent when the statistics office publishes new figures Tuesday.
Prime Minister Theresa May is aiming to strike a free trade agreement with the bloc that will keep tariffs at zero, though the government is making plans in case it fails to do so. Talks are currently deadlocked, with EU leaders wanting to agree on Britain’s exit bill before moving on to trade.
“The U.K. government must realize that walking away from the negotiating table is the worst possible outcome,” said Ilona Serwicka, research fellow at the UKTPO. A no-deal outcome would “impact most adversely on those households who already struggle to get food on the table.”
The researchers also found few advantages to eliminating all tariffs, an option espoused by the pro-Brexit group Economists for Free Trade.
Unilaterally abolishing tariffs would “not only give up the country’s most effective leverage in future trade negotiations but also expose some industries and places to relatively sharp competitive pressures, with implications for the firms affected and the jobs they provide,” the report said.