Supermarkets face ‘£3bn tariff bombshell’ without Brexit deal

UK supermarkets and their customers will shoulder a £3 billion “tariff bombshell” if the government fails to strike a post-Brexit trade deal, the British Retail Consortium (BRC)has warned.

The industry body issued the warning as the UK government wrangling with the EU over the terms of a trade deal go down to the wire this weekend, with the UK due to leave the EU customs union and single market on December 31 on a no-deal basis if it agreement cannot be found.

With just three weeks to go until the deadline, the BRC warned that without a deal in the next few days, supermarkets and their customers will face a £3.1 billion tariff bombshell on food and drink.

The UK grocery sector operates on tight margins to offer customers the best value possible, the BRC said, however, without a deal, the increase in tariffs will leave retailers with nowhere to go other than to raise the price of food to mitigate these new costs.

Many non-food retailers will also face large tariff bills for EU-sourced products such as clothes and ceramics, meaning the total cost to UK retailers and their customers will be even higher.

The EU is the UK’s largest trading partner and the source of four-fifths of UK food imports. In May, the UK published its new tariff schedule, which will apply from 1st January 2021 if a deal is not agreed.

Under the schedule, 85 per cent of foods imported from the EU will face tariffs of more than 5 per cent.

The average tariff on food imported from the EU would be over 20 per cent.

This includes 48 per cent on beef mince, 16 per cent on cucumbers, 12 per cent on oranges, 10 per cent on lettuce, and 57 per cent on cheddar cheese. Non-food items will also be impacted with items such as trousers and blouses being subject to 12 per cent tariffs.

January also poses many challenges for seasonal produce, with a much higher proportion of fruits and vegetables imported from the EU relative to June.

For example, the UK sources 85 per cent of its tomatoes from the EU in January, falling to just 30 per cent by June, during the UK growing season.

Checks and delays at the border could result in some of these products reaching UK customers with a shorter shelf-life.

Andrew Opie, director of food & sustainability at the British Retail Consortium, 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.

He explained that 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 1st January will create disruption in the supply of many goods.

“Retailers have spent huge amounts of time and money preparing ahead of 1st January - increasing the stock of tins, toilet rolls and other longer life products as part of their planning for a no deal Brexit, so there will be sufficient supply of essential products,” Opie continued.

“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.”

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