Food prices ‘could increase after Brexit’

Households face 'considerable and unpredictable' food price changes

Brexit could have a “substantial impact” on food prices, according to research from the Institute for Fiscal Studies (IFS), as manufacturers’ costs increase due to sterling devaluation.

It was likely tariffs would be imposed on food imports if the government failed to agree a free-trade agreement with the EU, the researchers said. That meant manufacturers’ costs would increase, and supermarket prices would subsequently rise too.

The researchers, Peter Levell, Martin O’Connell and Kate Smith, said exchange rates could also impact food prices.

“Movements in the exchange rate can also have both direct and indirect effects on the costs of food,” they wrote.

‘More expensive to buy imported food’

“When sterling depreciates, it becomes more expensive both to buy imported foods and to import inputs into foods that are produced in the UK. However, as with tariff changes, how exactly exchange rate movements affect the prices of different products is uncertain.”

Producer prices for food imports had already increased since the EU referendum. Consumer prices initially declined after the Brexit vote, but they have increased since the end of 2016.

UK households could face “considerable and unpredictable” fluctuations in food prices after Brexit, the think-tank said.

Lower-income families were most vulnerable to price rises, as they allocated a larger proportion of their income on food. Poorer households spent 23% of their expenditure on food, while wealthier households used 10%, the report said.

A number of studies warn of food price rises

The IFS report was the latest in a number of studies to warn of food price rises after Brexit.

Earlier this month, a report found imported products could become 22% more expensive for consumers, if the UK adopted a hard Brexit. The researchers – Tim Lang, Erik Millstone and Terry Marsden – warned UK food policy risked descending into chaos because the government had failed to prepare for Brexit.

Also this month, it was revealed ingredient prices for meat, fish and dairy products had already risen by 17%, 16% and 13% respectively, over the past 12 months. Data specialist Informa Agribusiness Intelligence said it was possible that the price of imports from Europe would rise if the UK left the Single Market.

Meanwhile, on July 27, the Home Office commissioned an assessment of the role EU nationals play in the UK economy and society.

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Comments (1)

Michael Smith - 31 Jul 2017 | 03:21

Back the UK not imports then!

The UK will benefit - UK farmers are already benefitting. Do not look at the future as if its a past vanishing - its a new and very big opportunity for UK suppliers. I am and importer, yes prices went up ( yours is old news) but STG will get a bit better, when the calmness comes. we have seen very high sales even since.

31-Jul-2017 at 15:21 GMT

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