Consumers and retailers face over £3bn tariff bill
Supermarkets and their customers face £3.1bn a year of tariffs on food and drink unless a free trade deal is reached between the UK and the European Union. The UK grocery sector is one of the most competitive in the world and operates on tight margins to offer customers the best value possible. However, if there is no deal before Christmas, the increase in tariffs will leave retailers with nowhere to go other than to raise the price of food to mitigate these new costs.
Many non-food retailers will also face large tariff bills for EU-sourced products, meaning the total cost to the industry and its customers will be even higher.
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 British Retail Consortium (BRC) has long been calling for a zero-tariff zero-quota trade deal between the UK and EU under its “Fair Deal for Consumers” campaign. With coronavirus affecting the livelihoods of millions of people in the UK, many households can ill afford higher prices for their weekly food shop.
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.
Andrew Opie, director of food & sustainability the British Retail Consortium, said:
“There is no time to waste, the UK and EU must hammer out a final arrangement as soon as possible. Coronavirus is already making life hard for consumers, particularly those on lower incomes and, and a no deal Brexit will have a massive impact on their ability to afford essential goods.
“UK consumers have benefitted from great value, quality, and choice of food thanks to our ability to trade tariff free with the EU. There is now the risk of a £3bn tax bill for the food we cannot source here in the UK.
Unless we negotiate a zero-tariff deal with the EU, the public will face higher higher prices for their weekly shop. This would prevent harm to shoppers, retailers and the wider economy.”