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Brexit has added almost £6bn to UK food bills in the two years to the end of 2021, hitting poorer households hardest, research has found.
Researchers at the London School of Economics (LSE) found that the cost of food imported from the EU increased due to extra red tape, which added £210 to the average household food bill in 2020 and 2021.
As low-income households spend a large proportion of their income on food, the impact of Brexit on their purchases was disproportionately greater, they said.
The research comes a day after data from the British Retail Consortium trade body showed UK food price inflation hit a record high of 12.4% in November as prices of basics such as eggs, dairy products and coffee rose.
Researchers at the Center for Economic Performance (CEP) at the LSE studied micro data-tracking trade flows and consumer prices for food products in the UK to identify the transfer of Brexit red tape costs to households.
“We find that leaving the European Union increased food prices by 3% a year, leading to a 6% increase over a two-year period,” they say in their report, titled Non-Tariff Barriers and Consumer Prices. Here comes: the evidence from Brexit.
His calculations translate into a £5.84bn spend for the food market alone, which equates to £210 per household.
The CEP found that Brexit-induced price rises led to a 52% higher cost of living increase for the poorest households in Britain than for the top 10% of households, which saw a 0.7% rise of 1.1%.
In 2015, the year before the referendum, 77% of food imports were from the EU.
After the December 2019 election, the researchers found an immediate increase in food prices from the EU as businesses relied on products and ingredients, “immediately starting to pass on customs costs to consumers”, the report said.
Regulatory costs vary by product, fresh red meat products are known to have a high “non-tariff barrier” (NTB) price due to the paperwork required, but vegetables such as onions, carrots and broccoli have close to zero NTB prices.
The researchers found price increases on products with high NTB with less significant cost for products in the low or zero NTB category.
The CEP said the EU single market is a “deep” trading bloc that has removed tariffs, but also regulatory differences on food standards that allowed frictionless trade between member states, including the UK, before Brexit.
Lord Frost’s Brexit trade deal, signed at the end of the transition period in December 2020, ensures that trade is tariff-free with the EU but raises trade barriers in the form of customs, paper-of-origin rules and checks on regulatory standards for agri-food products.
“On leaving the EU, the UK exchanged deep trading relationships with few barriers to doing business where a wide range of checks, forms and steps are required before goods can cross the border. Richard Davies, a professor at the University of Bristol and co-author of the report, said companies faced higher costs and passed most of them on to consumers.
He said the rise in non-tariff barriers (NTBs) to trade with the EU had contributed to 11% inflation in the UK, the highest in 40 years.
One benefit of Brexit was that domestic food producers now faced less competition from European imports, the report noted.
But he added: “Loss to domestic customers cost local companies more than £1bn in profits. Further, unlike regular tariffs, NTBs do not generate any revenue for the government.”
Nikhil Dutta, assistant professor of economics at the University of Warwick and co-author of the study, said: “The policy implications are very serious: non-tariff barriers are an important barrier to trade that should be of primary concern, at least to policymakers interested in lower consumer prices. equivalent to a tariff for.”
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