Supermarket prices in the UK could start increasing in future months as food supplies get disrupted due to Brexit, Covid-19 and weather-struck harvests.
Britain is just 10 weeks from leaving the EU, 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 January 1. Both sides are aiming for zero tariffs, but there’s a chance they won’t succeed. Either way, logistical burdens will 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.”
Supply chains snarled by the down-to-the wire negotiations risk sparking food inflation at a time when job cuts are climbing by a record amount. With shops already operating on low margins, higher tariffs likely would ripple into higher consumer prices, said the Food and Drink Federation, with members ranging from cereal makers to soft-drink companies.
A season of floods and drought also hurt growers. The paltry wheat crop means imports may double from the prior season as domestic values climb. Porridge maker Pimhill Farm raised prices about 6%, the first increase in seven years, after a May dry spell hampered oats output, and the Shropshire-based company is unsure how Brexit will affect costs for the imported nuts and raisins used in its longstanding muesli recipe, manager Ian Anderson said.
“It’s the unknown that’s the worry,” he said.
Shoppers in Britain spend a relatively low proportion of their income on food, and prices have been subdued in recent months. Still, the number of people in need has climbed as the coronavirus upends the economy. The Trussell Trust, which supports 1,200 food banks nationally, expects food-parcel demand to increase 61% in the fourth quarter from a year earlier.
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