The countdown is on for contentious new post-Brexit border controls on UK-EU trade, set to take effect on April 30th. Businesses are bracing for the full impact of these regulations, with fears of significant added costs and inflation.
A recent report by Allianz Trade warns these controls could hike import costs by 10% within the first year, adding £2bn in burdens for British businesses and further fueling the cost-of-living crisis.
Inflationary Pressures and Supply Chain Woes
The Allianz report highlights the significant inflationary impact of the government's Border Target Operating Model (BTOM). Covering imports worth £21bn, the checks will target agricultural products like eggs, live trees and plants, meat, and fish.
The additional costs are likened to a 10% tariff, which EU companies are likely to pass on to UK buyers. With these goods making up 6% of the UK's inflation basket, this could add 0.2 percentage points to a still-elevated inflation rate, particularly impacting dairy, meat, and fish prices.
While inflation has eased since peaking at over 10% last year, food prices remain stubbornly high, up 30% compared to three years ago. Government predictions downplay the inflationary impact, forecasting additional checks to add less than 0.2 percentage points to food inflation over three years.
Fresh Produce Industry Hit Hard
The implications for the fresh produce and plant sectors are particularly severe.
In a statement, Nigel Jenney, Chief Executive of the Fresh Produce Consortium (FPC), called the newly introduced Common User Charges (CUCs) a "thinly veiled tax on the industry." He warned that these exorbitant fees could add £200 million in costs across the industry and shatter supply chain confidence.
The CUC system presents a significant barrier for small and medium-sized enterprises (SMEs). Despite being capped, the fees remain substantial at £145 per consignment arriving via Dover or Eurotunnel, making the system unsustainable for many businesses.
Government vs. Industry
The government dismisses the industry's warnings, claiming that the impact on food prices will be minimal. In contrast, FPC argues that the CUCs are driving EU exporters to rethink supplying the UK market. Both importers and retailers are bracing for delays, disruptions, and spiraling costs that will inevitably be passed on to consumers.
FPC has long advocated for alternative, industry-managed solutions that would offer a more efficient approach. However, the development of an "assured operator status" to allow responsible businesses to self-manage inspections is still pending.
Wider Implications for UK-EU trade
The fresh produce crisis is just one symptom of the wider implications for UK-EU trade. A study by UK in a Changing Europe thinktank highlights the growing gulf opening up between UK and EU rules.
With the EU in "legislative overdrive" and the UK government's agenda stalling amidst election uncertainty, British companies exporting to the EU will increasingly have to comply with new EU standards without having any voice in their design.
Joël Reland, a research associate at UK in a Changing Europe, states: “The UK is living next door to a regulatory behemoth, which it cannot afford to ignore. Even after Brexit, the EU remains the UK’s chief export market, so British businesses have little choice but to conform with new EU regulations. The main difference is that now the UK government has no means of influencing EU policy decisions from the inside.”
A government spokesperson contends: "We do not recognise these figures. These checks will have a minimal impact on food prices, while saving traders and businesses around £520m each year compared to the model originally proposed.
"Our border checks are fundamental to protecting the UK’s food supply chain, farmers and natural environment against costly diseases reaching our shores.”