Government urged to be pragmatic to avoid food price hikes from 1 January

Tariffs imposed on food and drink are typically very high, so the impacts of a no-deal Brexit will inevitably have profound effects on customer choice
- Dr Elitsa Garnizova
Brexit 747 x560

Consumers face a large increase in food prices from 1 January 2021, unless urgent and pragmatic action is taken by the UK Government and the European Union.

This is the key finding from a new report released today (23 September) from the London School of Economics and Political Science (LSE), commissioned by leading dairy co-operative Arla Foods.

The report, produced by LSE Consulting’s Trade Policy Hub, finds that higher trade tariffs and the establishment of new non-tariff barriers will lead to a significant rise in the price of fresh foods.

The authors of Vulnerabilities of Supply Chains Post-Brexit outline the interlinked nature of the UK and EU food sectors and set out practical steps that can be taken to minimise disruption.

At present, a total of 40 percent of agricultural and food products consumed by households and businesses in the UK are imported from the EU.  In the dairy sector, 15 percent of all products sold are imported into the UK, and 99 percent of this currently comes from the EU.

The report outlines how a no-deal departure, with high tariffs, will hike up the prices of many of Britain’s best-loved products. Even with a deal, non-tariff barriers such as increased paperwork and customs checks will have a major impact, increasing prices and reducing product availability.  Research by Arla earlier in the year shows customers expect to have the products they want on the shelves and do not expect to pay more.

Agricultural production and the manufacturing of food will also be affected with costs from tariffs and non-tariff barriers impacting farmers and processors across the UK. 

The importance of trade links between the UK and EU has been reinforced this year by the coronavirus outbreak when imports of many products rose sharply to cope with changing patterns of demand. The end of the transition period risks breaking those connections, impacting food accessibility.

The authors outline how the UK and EU can work together to avoid this situation. For example, a trade deal for food and drink would deliver major benefits not just for UK consumers and producers but also for exporters of these products from Europe.

Practical steps can also be taken now to protect farmers, processors and the public, such as confirming Great Britain’s SPS regime and clarifying the UK’s Border Operating Model, showing how customs clearance and payment of customs duty will be simplified.

The report also calls for the Goods Vehicles Management System and Smart Freight Service to be tested and functional before the end of the year, and in the medium-term for alterations to be made to the UK’s proposed new immigration regime.

Ash Amirahmadi, UK Managing Director of Arla Foods explains: “This report shows how integrated the UK-EU food supply chain is and the mutual benefits this brings to both sides. Because of this free trade with our largest trading partner UK customers have access to a large choice of high quality, affordable, products. We want to ensure this continues after 31 December 2020 and we know consumers expect this to happen as well.  But for this to happen it is essential we secure a tariff-free agreement. And it is vital too that the Government takes pragmatic and sensible steps to limit the impact of non-tariff barriers.”

Dr Elitsa Garnizova, Lead of the Trade Policy Hub at LSE and one of the authors of the report, adds: “Tariffs imposed on food and drink are typically very high, so the impacts of a no-deal Brexit will inevitably have profound effects on customer choice. Even with risk management strategies in place, no-deal will have a significant impact on the fresh foods sector and these need to be considered by policy-makers in the coming weeks.”

The report also takes a longer-term perspective, showing that whatever deal is done and whatever steps are taken flows of food and drink products to and from the United Kingdom are set to change very significantly over the coming years.

It calls for the Government to take a strategic approach, working with farmers, processors and the rest of the supply chain to address the challenges and harness the opportunities that arise to ensure that farmers, consumers and the food industry all benefit from what happens once the UK is fully out of the European Union.

The Vulnerabilities of Supply Chains Post-Brexit report can be accessed here

Behind the article

About Arla Foods

Arla Foods is an international dairy cooperative owned by 9,700 farmers from Denmark, Sweden, the UK, Germany, Belgium, Luxembourg and the Netherlands. Arla Foods is one of the leading players in the dairy arena with well-known brands like Arla®, Lurpak®, Cravendale® and Castello®. Arla Foods is focused on providing good dairy nourishment from sustainable farming and operations and is also the world's largest manufacturer of organic dairy products.

About Trade Policy Hub (LSE Consulting)

Trade Policy Hub (TPH), a specialised team within LSE Consulting, provides professional, bespoke trade and investment expertise for clients across the public and private sectors. Our venture relies on three components: research on global trade and investment policy issues, a wide network of experts inside and outside the LSE, and professional management. TPH offers organisations up-to-date expertise, multidisciplinary approach, reach into networks and it is becoming an incubator for trade policy ideas.