Brexit added £210 to household food bills in two years as ‘poorest hit hardest’, research finds

Brexit added an average of £210 to household food bills in the two years to the end of 2021, new research has found.

The increase was driven by extra checks and requirements on goods - representing an “important impediment” to trade with the bloc - which burned a £5.8 billion hole in consumers’ pockets.

Much of the cost was then passed on to consumers, affecting the poorest households the most, according to the Centre for Economic Performance (CEP) at the London School of Economics. As low-income households typically spend a greater share of their pay packets on food, the impact of Brexit on their purchases was disproportionately greater, the CEP said.

The Trade and Cooperation Agreement came into force in January 2021 and ensures that trade between the UK and EU remains tariff-free, but it has been criticised for lacking “depth”.

The CEP blamed the increase in food prices on a Brexit-induced rise in “non-tariff barriers” (NTBs) on trade between the UK and EU, including new customs checks and measures affecting the movement of animals and plants.

These additional checks technically didn’t come into force until last year, but it is likely that firms engaged in “anticipatory changes” in light of former prime minister Boris Johnson’s “hard” approach to Brexit, co-author Nikhil Datta said.

Brexit costs passed to consumers

The CEP said it appears that EU exporters or UK importers - or both - are facing higher costs because of these new barriers, and between 50% and 88% of this burden is passed on to consumers.

Richard Davies, a professor at the University of Bristol and co-author of the study, said: “The UK inflation rate rose above 11% in 2022, the highest rate in 40 years.

“Many factors, affecting both supply and demand for goods and services, are involved. One factor in this high inflation has been the rise in non-tariff barriers for trade with the EU.

“In leaving the EU, the UK swapped a deep trade relationship with few impediments to trade for one where a wide range of checks, forms and steps are required before goods can cross the border.

“Firms faced higher costs and passed most of these onto consumers. Over the two years to the end of 2021, Brexit increased food prices by around 6% overall.”

Mr Datta, fellow co-author and assistant professor of economics at Warwick University, added: “The policy implications are stark: non-tariff barriers are an important impediment to trade that should be a first-order concern, at least on par with tariffs, for policymakers interested in low consumer prices.

“We calculate that Brexit caused a loss of £210 for the average household, or £5.84 billion overall, when looking at its impact on the food market alone. Since poorer households spend a larger fraction of their income on food, they are hit harder.”

In response, the government said it has already signed trade deals with 71 countries, plus the EU, that account for £814bn of bilateral trade, and is seeking new deals with India, the Gulf, Canada, Mexico, Israel and the £9 trillion combined GDP free trade bloc in the Indo-Pacific to spur growth, create jobs and boost wages for UK workers.

UK exports were £747.9bn in the 12 months to end of September 2022, an increase of £132.1bn (21.5%) in current prices, compared to the previous 12 months, and an increase of £48.2bn (6.9%) compared to UK exports in 2019.

The government added that current ONS trade data shows that the UK’s trade recovery since the pandemic “remains strong” and with the latest quarterly, exports to the EU are above pre-Covid levels in current prices despite recent global economic events.

A spokesperson said: “We recognise that people are struggling with rising prices due to global inflationary pressures here in the UK, EU and across the world, and we are protecting millions of the most vulnerable families with at least £1,200 of direct payments, including £400 per household towards energy costs.

“Our trade agreement with the EU is the world’s largest zero-tariff, zero-quota deal, and by also removing tariffs on £30bn of goods, we are cutting costs and reducing red tape.”

Food inflation surges to 12.4%

The research comes the day after data from the British Retail Consortium trade body revealed that UK food price inflation surged to a record 12.4% in November, with the cost of basic items such as eggs, dairy products and coffee going up in price.

Overall shop prices are now 7.4% higher than last November, up from 6.6% in October, to set another record since the British Retail Consortium (BRC) records began in 2005. But food inflation accelerated considerably further to 12.4% from October’s 11.6% – also the highest rate on record as rocketing energy, animal feed and transport costs forced up prices.

The BRC-Nielsen IQ Shop Price Index shows fresh food inflation rose even higher to 14.3%, up from 13.3% last month, driven particularly by the cost of meat, eggs and dairy, while coffee prices “shot up” as high input costs filtered through to price tags.

Christmas gifting is also set to become more expensive than in previous years with sports and recreation equipment seeing particularly high increases, the BRC said. Helen Dickinson, BRC chief executive, said: “Winter looks increasingly bleak as pressures on prices continue unabated.

“While there are signs that cost pressures and price rises might start to ease in 2023, Christmas cheer will be dampened this year as households cut back on seasonal spending in order to prioritise the essentials.”