Wednesday 29 March 2017

Price Of Imported Fruits Will Increase By Almost 8% After Brexit


Fruit and vegetables, flowers and olive oil will all become more expensive once the UK leaves the EU, no matter what trade deal is struck, City analysts have calculated.

The price of food imported from the EU is likely to rise by up to 8% by the end of any transitional period as Britain is forced to impose extra border controls, making it more difficult to bring in foods that we cannot produce ourselves.

Last year the UK imported food and agriculture products worth £47.5bn , of which 71% were from EU nations. The most valuable imports include Dutch and Spanish fruit, vegetables and flowers as well as French wine.

Harry Smit, a senior analyst at Rabobank and author of Future Food Security in the UK: the Impact of the Brexit on Food and Agribusiness in Europe and Beyond, said: “UK consumers should brace themselves for some price rises – perhaps by as much as 8% – on those products for which Britain is almost solely reliant on the EU.”

Smit’s arguments counter claims from Brexit supporters that food prices will fall as high tariffs on goods imported from outside the EU are removed. Sugar producer Tate & Lyle, for example, claims its raw material bill is inflated by €40m a year due to EU tariffs and quotas.

But Smit argues that prices are likely to rise whatever the nature of the UK’s new relationship with the EU – whether it opts for tariff-free food imports as part of a deal to encourage international trading partners to welcome UK service companies, or imposes tariffs to protect farmers.

Analysts at the bank predict that the weak pound, which has helped push Britain’s inflation rate to its highest rate for more than three years, will continue to depreciate. They believe sterling will fall a further 5% over the next year, putting more pressure on prices.

Smit said Brexit could provide a boost to the UK’s food manufacturers as producers try to offset import costs by bringing raw materials and processing them here rather than buying in finished items from abroad.

But UK’s food and agriculture sector also relies heavily on foreign labour, with about a third of workers coming from the EU, so any step-up in domestic production combined with exiting the single market could make labour more difficult to find, pushing up wages and potentially food prices.

Ian Wright, director general of the Food & Drink Federation trade body, says price changes will depend heavily on the nature of the UK’s initial deal with the EU. “If we have a business as usual transitional deal you wouldn’t expect costs to rise. But it will be different if we move to World Trade Organisation tariffs,” he said.

About a quarter of our milk is produced outside the UK, for example, and with little prospect of stepping up UK production to meet demand, prices would be affected by a 36% tariff on imports.

But Wright agrees that getting rid of all tariffs, as New Zealand did some years ago, won’t necessarily mean cheaper prices. Such a move comes with the social consequences of mass upheaval in agricultural communities requiring support with costs that would offset any savings on the price of beef, for example.

“Ministers say they want to uphold high standards of animal welfare. There are quite a lot of countries that are offering cheap products but they won’t be able to meet those standards,” Wright adds.



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