Research has shown that Brexit increased the UK’s food bill by almost £6bn in the two years up to 2021. This impacted the poorest households the most.
Researchers at the London School of Economics (LSE), discovered that food imports from the EU have increased in cost because of additional red tape. This added £210 to household food costs over 2020-2021.
They stated that Brexit had a disproportionately larger impact on low-income families who spend more of their income on food.
This research follows data from the British Retail Consortium that showed that UK food inflation reached a record high at 12.4% in November. The price of basic items like eggs, milk products, and coffee rose.
The Centre for Economic Performance (CEP), LSE, studied micro data-tracking trade flow and consumer prices for UK food products to determine the cost transfer to households by Brexit red tape.
“We found that leaving the European Union raised the price of food products by 33% per year, leading to an increase of 6% over a 2-year period,” they write in their report, Non-tariff barriers, consumer prices: evidence from EU.
These calculations resulted in a £5.84bn food market cost, which is equivalent to £210 per household.
CEP discovered that the Brexit-induced price rise caused an overall cost-of-living increase for the poorest households at 1.1%, 52% higher than the 0.7% rise experienced by the top 10% of households in Britain.
In 2015, the year prior to the referendum, 77% of food imports came from the EU.
Researchers found that there was an immediate increase in EU food prices after the December 2019 elections. Businesses that depend on EU products and ingredients “immediately started to pass on to customers” the costs of staff at customs.
The regulatory costs vary depending on the product. Fresh red meat products have a high “nontariff barrier (NTB), cost due to the paperwork, while vegetables like onions, carrots, and broccoli have close to zero NTB.
Research has shown that products with high NTBs are more expensive than products with low NTBs. However, the price increases were not as significant as those with lower NTBs.
CEP stated that the EU single market was “deep” and eliminated tariffs. However, there were regulatory differences in food standards which allowed frictionless trade between member states. This includes the UK.
The Brexit trade agreement signed by Lord Frost at the close of the transition period in Dec 2020 ensures that trade is free from tariffs with the EU, but creates trade barriers in the form of customs, rules for original paperwork and regulatory standards inspections for agri-food items.
“By leaving the EU, the UK lost a deep and open trade relationship that had few obstacles to trade in exchange for one that requires a variety of forms, checks, and steps before goods cross the border. Richard Davies, a professor from Bristol University and coauthor of the report, said that firms faced higher costs and passed most on to consumers.
He stated that the UK’s 11% inflation, which is the highest in 40 years, was due to non-tariff tariff barriers (NTBs), for trade with the EU.
The report pointed out that Brexit had one benefit: domestic food producers were now less competitive with European imports.
It added that the gains for domestic businesses are outweighed by the losses to domestic consumers of more than £1bn. NTBs also do not generate revenue for the government, as opposed to regular tariffs.
Nikhil Datta is an assistant professor of economics at Warwick University. He was also a co-author.
