The British Retail Consortium (BRC) has warned that UK supermarkets and their customers could face a £3.1bn tariff “bombshell” on groceries unless a Brexit deal is agreed with the EU in the coming days.
The trade body warned that without a deal, this increase in tariffs will “leave retailers with nowhere to go” other than to raise food prices and mitigate these new costs.
It added that the only way to avoid this was if the UK and EU could agree a free trade deal before negotiations end.
If a No-Deal Brexit does occur, the BRC warned that many non-food retailers will also face large tariff bills for EU-sourced products, meaning that the total cost to UK retailers and customers could be “even higher”.
The UK previously published a new tariff schedule which will apply from 1 January 2021 if a deal is not agreed.
Under the schedule, 85% of foods imported from the EU, which is the source of four-fifths of UK food imports, will face tariffs of more than 5%. The average tariff on food imported from the EU would be over 20%, while non-food items will also be subject to tariffs.
The BRC said it has “long been calling” for a zero-tariff zero-quota trade deal between the UK and EU under its ‘Fair Deal for Consumers’ campaign, warning that many households cannot afford higher prices for their weekly food shop.
Its July report entitled ‘Why Tariffs are Bad News for UK Consumers’, explained that “given the highly competitive nature of retail, the industry cannot absorb all these increased costs”.
In addition, it warned that increases in physical checks, paperwork, and other non-tariff barriers will push up the cost for retailers even more.
Andrew Opie, director of Food and Sustainability at the BRC, said: “With just weeks to go, it is alarming that there has still been no deal agreed with the EU, putting customers in line for a £3bn tariff bombshell. Currently, four-fifths of UK food imports come from the EU and without a tariff-free deal, supermarkets and their customers face over £3bn in tariffs from 2021.
“Furthermore, retailers will need time to implement the aspects of any deal, and the ongoing uncertainty surrounding the new checks and red tape that will apply from 1 January will create disruption in the supply of many goods.”
He added: “Retailers have spent huge amounts of time and money preparing ahead of 1 January. They have also been building new customs and VAT processes, working with suppliers to ease logistics, and more – but with so many unknowns, some disruption for consumers and businesses is inevitable.”
“Retailers are doing everything they can in time for 1 January, but no amount of preparation for retailers can entirely prevent disruption to food and other essential goods that come from or through the EU. With negotiations entering the 11th hour, protecting UK and EU consumers from billions in tariffs must be the top priority.”