Brexit Could Add £7.8 Billion To Cost Of Retail Goods, Study Suggests
New research suggests that £7.8 billion could be added to the cost of retail goods if the UK fails to agree a Brexit deal with the EU.
According to the study, conducted by Retail Economics and legal practice Squire Patton Boggs, the risk of higher costs from new tariffs is greatest for food and drink from the EU, as this market is more exposed to EU imports than any other retail sector.
Currently, more than 70% of UK food and drink imports originate from the EU, and potential alternatives are limited by high tariffs.
Richard Lim, chief executive of Retail Economics, said that if the UK government fails to agree a deal with the EU, the retail industry could be facing "a debilitating wave of rising costs" from import duties.
"Extensive research has been carried out, which reveals an additional £7.8 billion could be added to the cost of retail goods should a hard-Brexit scenario become a reality following a transition period," Lim said.
"Food retailers would face the toughest challenge, given that almost three quarters of what we eat is imported from the EU," Lim added. "Some tariffs on meat and dairy products would rise to more than 80%, causing an inevitable surge in food inflation to hit families."
Earlier this month, Sainsbury's CEO, Mike Coupe, warned that Brexit would lead to an unprecedented food shortage if the UK leaves the European Union without a deal.
In addition to the potential increase in costs, the report highlights that the retail industry could also be negatively affected by any new immigration system for EU citizens, which could restrict access to a valuable workforce.
Matthew Lewis, head of the Retail Industry Group at Squire Patton Boggs, said that now is the time for UK retailers to start scenario planning and risk assessment.
“There are over 170,000 EU citizens working in British retail," Lewis said. "Although greater reassurance has now been given to EU citizens already in the UK – both before we leave and during the transition period – there is no clarity yet on the immigration restrictions that will be imposed on those EU citizens arriving from 2021. Losing access to this valuable workforce could increase competition in the retail job market and further drive up costs for retailers.”
© 2018 European Supermarket Magazine – your source for the latest retail news. Article by Sarah Harford. Click subscribe to sign up to ESM: The European Supermarket Magazine.