Brexit, covid and climate colluding to raise UK food prices

Supermarket prices in Britain could start increasing in coming months as food supplies get pummelled by a triple whammy of Brexit, Covid-19 and weather-struck harvests.

The UK is just 10 weeks from leaving the European Union’s single market, yet there’s still no trade deal between the two sides. If the status quo persists, import taxes averaging 18% will be slapped on meat, produce and beverages coming from the bloc starting Jan 1. Both sides are aiming for zero tariffs, but there’s a chance they won’t succeed. Either way, logistical burdens stack up as new checkpoint bureaucracies are created.

Portions of those extra costs likely will make their way to consumers, putting some foods out of reach and exacerbating existing inequalities. The looming sticker shock dovetails with grocers trying to ward off stockpiling in the face of more Covid-19 lockdowns and domestic wheat output dropping near a four-decade low after a year of weather extremes.

“We’re all very nervous,” said Simon Lane, owner of Fruco Plc, which imports about 100 truckloads of fruit and vegetables from the EU every month. “It’s a watch-this-space situation. One thing is for sure: no-deal will equal a bad deal for consumers.”

The UK relies on foreign fare for about half the meals consumed domestically, and the deadline for a Brexit trade deal approaches during winter, when little is harvested from local fields. Talks between the two sides resumed Thursday, and Irish Prime Minister Micheal Martin said “momentum” is building toward a deal.

The uncertainty leaves importers scouring tariff codes to calculate the potential hits to their business. Spanish-foods retailer Brindisa needs to decide whether to stockpile as much as 500,000 pounds ($645,000) of shelf-stable items, such as olives and tinned fish, to avoid disruptions for its customers. It also may start transporting goods by sea for the first time.

“The UK can’t feed itself,” said Heath Blackford, managing director for Brindisa’s wholesale division. “If we don’t get a deal, we should all be expecting to pay more for our food.”

Source: Bloomberg