Supermarkets and shoppers will have to absorb £3.1billion a year of food and drink tariffs unless a free trade deal is reached between the UK and the EU, according to a report from the British Retail Consortium today (Fri).
British shoppers are set for higher prices in supermarkets, caused by customs duties and extra costs at the UK border from 1st January.
What did the British Retail Consortium say?
The British Retail Consortium (BRC), which represents retail businesses and teh retail industry, says "The EU is the UK’s largest trading partner and the source of four-fifths of UK food imports. In May, the UK published its new tariff schedule, which will apply from 1st January 2021 if a deal is not agreed. Under the schedule, 85% of foods imported from the EU will face tariffs of more than 5%. The average tariff on food imported from the EU would be over 20%. This includes 48% on beef mince, 16% on cucumbers, 10% on lettuce, and 57% on cheddar cheese."
The BRC’s July report, “Why Tariffs are Bad News for UK Consumers”, explained that, given the highly competitive nature of retail, the industry cannot absorb all these increased costs, meaning the public would face higher prices from 1st January 2021. Furthermore, increases in physical checks, paperwork, and other non-tariff barriers will push up the cost for retailers even more.
With the coronavirus crisis already having a major impact on consumer spending, it is more important than ever that Government agrees a deal that does not lead to price increases in shops and online.
Commenting, Best for Britain CEO Naomi Smith said:
‘The BRC figures support our findings in the Affordable Food Deal report, and a lot of the foodstuffs affected are going to be basic essentials such as pasta and tinned tomatoes. That means the most vulnerable in society are going to be at greatest risk of going hungry.
‘Our figures show that even a small basket of nine basic foodstuffs could cost £250-a-year more.
‘With unemployment rising, Covid-19 returning and global business confidence shattered, it is now imperative the UK Government delivers the trade deal it promised us all, before these rising food costs pile pressure on top of pressure for UK businesses and consumers.
‘These new figures mean one thing for struggling Britons: hunger. This disaster is unfolding on Boris Johnson’s watch, and his bluster and blather will not stop families starving. The time to agree a deal is now, or on his conscience be it.’
What does the Affordable Food Deal Report say?
The minimum price increase for the collection of items in Table A would be £1.35. If this indicative shopping basket provides a family of four with roughly two days of nutritious meals, this would add around £246.38 to a household’s food bill per year.
Examples of changes under new UK Global Tariff for basic food items (Table A)
|
Product |
UK Global Tariff |
Increase per item |
Current RSP of own-label item at an indicative major UK retailer* |
% |
Domestic production / FTA import? |
| Tinned vegetables (sweetcorn, 326g) | 4% + £7.80/100kg | 3.4p | 50p | 6.8% | Currently no country with an FTA with the UK |
| Baked beans | 16% | 4.2p | 30p | 7.1% | UK production is available but would not meet UK demand, would create monopoly and reduce competition |
| Tinned fruit (canned peaches, 400g) | 18% | 7p | 80p | 8.75% | South Africa is the only exporting country with an FTA with the UK. Cannot meet UK demand. Any potential FTA with the US would not provide a solution as freight costs would offset duty gain |
| Dried pasta (penne, 500g) | 6% + £20/100kg | 12p | 53p | 22.6% | UK production is possible but is very small and could not meet volume requirements |
| Pulses (tinned red kidney beans, 400g) | 16% | 6p | 55p | 10.9% | UK production is possible, but only one UK facility can tin pulses, meaning imports would still be necessary |
| Tinned meat (Prince's canned beef, 430g)* | 16% | 30p | £2.50 | 12% | While some corned beef is already imported from outside the EU (and may incur a duty), affordable brand Prince's canned beef would currently incur a UK Global Tariff duty |
| Tinned tomatoes (400g) | 14% | 4p | 35p | 11.4% | The UK currently has no FTA with any countries which produce tinned tomatoes |
| Evaporated milk (400g) | £36/100kg | 18p | 65p | 27.6% | No evaporated milk production facility exists in the UK |
| Olive oil (Napolina, 400ml)* | £104/100kg | 50p | £1.50 | 30.3% | No import duty applies if oil is refined in the UK, but it is if bottled. Unlikely the UK has the capacity to refine all oil domestically |
Source: Best for Britain analysis of UK Government guidance 'UK tariffs from 1 January 2021'
*Where own-label RSP data has been unavailable, price has been taken from an affordable, widely available branded product.
Table A represents a conservative estimate, based on the UK Global Tariff and other import and consumer data. Other administrative costs and supply issues could increase prices even further. For example, the extra administrative burden now published by the Government for customs clearance of up to £46 per container will add significant costs to business, which may be passed on to UK consumers. Other factors contributing to an increase in food prices include the value of the pound sterling which, since the referendum has fallen, leading to some small price rises.
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