With 31st january approaching the Brexit cloud looms over the food industry in the UK. The Parliament has yet to agree to a deal and there is disarray surrounding how Brexit will affect the cost of food and wholesale distribution businesses, therefore.
Around 30% of the food is imported by the UK from the EU which is a lot more significant than the 10% which is imported from the rest of the world.
The Theresa May plan provides a 21-month transition period to the UK and EU to work out future trade agreements and permitting immediate imports to cross borders and be distributed smoothly.
Food prices are likely to be affected by this. The imports and trade agreements which will substitute are likely to be affected by weather, tariffs, currency depreciation and delays due to check and balance layers at the borders.
Food Prices and tariffs
Tariffs are a type of tax levied on imported goods. The tariff rates vary from product to product and it also varies depending on the country that the products are imported from and whether there is a trade deal involved.
The members of the EU have such a trade deal in place which exempts member countries from having to pay tariffs on several products, especially food products. Brexit is likely to change this. The University of Sussex reports suggest that the average tariffs of 44.6% are predicted and this would lead to the imported products’ price rising to a whopping 8.1%. Dairy products, meat, oils and vegetable prices are predicted to rise dramatically post- Brexit.
Businesses will suffer due to this because customers want to buy the products that they are used to buying at competitive prices.
In theory, the UK could independently choose to lower or scrape tariffs it may result in their consumers having their favourite products available at the affordable rates. This would result in a mere 1% reduction in food prices. The highest tariffs are levied on the products that are imported from the EU currently at little to no tariffs such as meat and dairy. In order to get meat and dairy products at competitive prices, the UK could import meat and dairy products from anywhere besides the EU.
There are concerns began raised regarding the lowering of tariffs on products which are produced in the UK. Farmers in the UK are distraught thinking cheap imported food products will replace the local businesses.
The government has responded to providing a balance where the there will be no such thing as zero-rate tariffs, but the local business would have to come through with reasonable rates for the consumers at large that want the prices to be affordable.
According to British Retail Consortium, March is especially busy because UK imports most of its fruits and vegetables from the EU. The government addressed that in March the country is extremely reliant on EU imports and a no-action agreement can lead to severe shortages of fruit and vegetables as well as over-pricing
Currency and Exchange Rates
Wholesale food distributors are especially concerned about the value of Pound depreciating due to Brexit. There is a direct link between the cost of purchasing imported goods and the price at which they are sold in the supermarket.
Wholesale industry stands on the principle of providing products in bulk for discounted prices. The spike in prices and the shortage of food products can strain such businesses.
According to the London School of Economics, the Pound suffered from currency depreciation in 2008 more than any other currency and it led to food prices rising in the UK dramatically. This is likely to be the case once again.
Non-Tariff Barriers and the Food industry.
Check and balances area the non-tariff barriers that the food industry will be affected by. The government is likely to set up check-posts following Brexit, and this will affect the price of food products.
Check-posts can result in a delay in the delivery of imports, reduce the shelf-life of products and result in the additional cost of business to wholesale food suppliers due to the fee collected at check-posts.
Meta Description: Brexit will result in delays, reduce the shelf-life of and result in an additional cost to wholesale food suppliers due to the fee collected at check-posts.