Food prices soaring

Brexit red tape to send UK food prices soaring even higher

Britain’s food inflation is already at a 45-year high and businesses worry new red tape will make matters worse.

BY STEFAN BOSCIA

A new system of border checks on goods arriving from Europe is expected to force rocketing U.K. food prices even higher as businesses grapple with hundreds of millions of pounds in extra fees.

British business groups last week got sight of the U.K. government’s long-awaited post-Brexit border plans, via a series of consultations. One person in attendance said the proposals will “substantially increase food costs” for consumers from January.

That could spell trouble in a country which imports nearly 30 percent of all its food from the EU, according to 2020 figures from the British Retail Consortium, and where the annual rate of food and drink inflation just hit 19.2 percent — its highest level in 45 years.

Government officials told business reps at one consultation that firms will be hit with £400 million in extra costs as a result of long-deferred new checks at the U.K. border for goods entering from the EU.

Ministers have argued that the full implementation of the new post-Brexit procedures — which will eventually include full digitization of paperwork and a “trusted trader scheme” for major importers in order to reduce border checks — will more than offset these costs in the long-run as they will also be rolled out for imports coming from non-EU countries as well.

Supply-chain disruption caused by the Ukraine war, poor weather and new trade barriers due to Brexit have all been blamed for the U.K.’s surge in food prices.

A member of a major British business group, speaking on the condition of anonymity, said that incoming post-Brexit red tape will mean “some producers on the EU side will find it is no longer possible to trade with the U.K.” and that “some small businesses will find themselves shut out.”

“It will add to the costs, and probably inflation, but I think we need to go through this so we can work with the EU to find advantageous improvements,” they said.

“We can't keep running away from the fact we need to implement our own border checks.”

‘Not business as usual’

Britain has delayed the implementation of full post-Brexit border checks multiple times, while the EU began its own more than two years ago.

The government’s new "target operating model," published last month, will see the phased implementation of new border and customs checks for EU imports from October.

This will include a new fee that must be paid from January for all goods that are eligible for border checks, including items like chilled meat, dairy products and vegetables.

A new fee will be applied from January for all goods that are eligible for border checks, including items like chilled meat, dairy products and vegetables | Paul Faith/AFP via Getty Images

Each batch of goods that could be subject to checks, even if they are ultimately not chosen by border staff for inspection, will be hit with a fee of between £23 to £43 at inland ports.

The first business figure quoted above said the scale of the new fees came as a surprise, after firms had been previously assured by the government that these costs would be dependent on whether goods had actually been checked.

“[Former minister] Jacob Rees-Mogg said there would be minimal costs. Initially we thought it was business as usual, but it’s not,” they said.

“There were people at this [consultation] saying that this is not a massive increase, but it will substantially increase food costs.”

William Bain, trade expert at the British Chambers of Commerce, said there is a “strong prospect” of higher inflation due to the new Brexit checks.

“EU suppliers may be less willing to trade with British based companies, because of increased costs and paperwork. The costs of imported goods would almost certainly increase,” he said.

But he added: “We knew this day was coming and that inbound controls on goods would be applied. It’s a part of having a functional border and complying with the U.K.’s international commitments.”

Reality check

The U.K. has seen trade flows with the EU disrupted since leaving the bloc’s single market and customs union.

Recent analysis by the Financial Times found that Britain’s goods exports are dropping at a faster rate than in any other G7 country.

Recent figures from the Office for National Statistics meanwhile show that U.K. trade in goods with EU countries fell at a much faster rate than from non-EU countries in January.

Conservative MP Tobias Ellwood told POLITICO that he fears his party will pay a price at the next general election, due to be held by January 2025, if the government does not seek better trading arrangements with the EU.

“There’s certainly a revision across the nation when it comes to Brexit — people are realising that what we have today isn't what they imagined, whether you voted for Remain or for Brexit,” he said.

“The reality check is that it has become tougher economically to do business with the Continent and quite rightly there's an expectation that we fix this.”

A government spokesperson said: “The target operating model implements important border controls which will help protect consumers and our environment and assure our trade partners about the quality of our exports.

“It implements these important controls in a way which minimises costs for businesses and prevents delays at the border.”