Brexit expected to lead to higher food prices for consumers

02 February 2021 Consultancy.uk 3 min. read

As UK grocery stores already suffer supply shortages following the UK’s exit from the European Union, analysis from global consultancy OC&C Strategy Consultant suggests that food prices will see a hike in the coming years. The researchers expect that at least some of an 8% spike in the cost of imported meals will be passed onto the consumer.

Days after the UK finally completed its mammoth withdrawal from the European Union, Ocado became the first large grocer to warn of stock shortages as it was hit by staff absences linked to Covid-19, while hauliers grappled with extra customs controls after Brexit. The online grocer, which became a lifeline for shoppers wishing to avoid the health risks of walking shopping in public during a pandemic, warned regular customers that “changes to the UK supply chain have affected some of our suppliers and may result in an increase in missing items and substitutions over the next few weeks.”

Soon after, Lord Rose, Chairman of the supermarket delivery company went on to warn that the cost of added paperwork traders must go through following Brexit will be “passed on to the consumer.” The senior retail chief told the UK press that delays and difficulties in international shipping caused by added red tape resulting from Brexit will mean customers will end up paying more.

UK and EU balance of trade

Similarly, Lorenzo Zaccheo, Managing Director of haulage firm Alcaline UK, also took to BBC Radio 4’s Today Programme to warn that the customs changes would lead to a “bloodbath” for the sector, as delivery delays have begun eating into already-tight profit margins.

New analysis from OC&C Strategy Consultants has similarly suggested the consumers could soon face a pricing hike as a result of Britain’s exit from the remaining bloc of 27 EU nations. Referencing what it called a raft of “pink tape,” plus new checks on the border, OC&C experts determined that three billion kilos ($4.1 billion) in prices for meals importers could be added to industry bills, in accordance with the UK’s Meals and Drink Federation.

According to OC&C’s Will Hayllar, higher costs for importing ingredients or finished products, or changes to tariffs, could likely result in price inflation. Suppliers’ margins were already paper-thin, suggesting they will struggle to absorb the price rises, leaving the answer of who’s going to bear the brunt of the changes unclear. “It is either passed on or major efficiencies have to be found elsewhere,” he said.

Estimates from the industry-funded Agriculture & Horticulture Growth Board present bills growing 5%-8% for livestock merchandise and 5% for crops commerce. “There could possibly be a tempestuous set of discussions to come back between suppliers and supermarkets, who’re ever-aware of the have to be price-competitive,” added Hayllar.

Should this conclude in costs being passed onto the consumer, it could put even more pressure on the thinly-spread household income of the UK which had already pushed 1.9 million people to use foodbanks in 2019 alone. The double whammy of the pandemic’s financial fallout and the additional Brexit prices is already worsening the UK’s meals insecurity to that end.

According to Mark Curtin, head of London-based meals waste redistribution charity The Felix Challenge, the group offered roughly 21 million meals last year, and that is anticipated to leap to 38 million in 2021. “We’re already going through big demand,” Curtin elaborated. “This can solely be additional exacerbated due to the necessity to assist people who find themselves discovering it troublesome to afford high quality meals.”