New Brexit import checks could add fuel to the ongoing UK food inflation fire

27 Jun 2023 --- A draft strategy by the UK Department for Environment, Food and Rural Affairs (Defra) would impose a charge for every consignment entering the country from the EU. According to the Fresh Produce Consortium (FPC), importers won’t be able to absorb the additional costs, which will need to be passed to consumers.

Additional costs would come just some months after the UK appeared to have reached peak inflation, although prices keep increasing steeply every month. Food prices are now far from the 19% inflation rate reached in April, with new data from June putting the rate at 15.4%.

Essentials such as vegetable oils, flour, milk and eggs prices are declining faster than other food commodities.

The new border inspections would add £20 to £43 (US$25.5 to US$54.8) per consignment coming from the EU. The FPC estimates the fresh produce industry would have to pay up to £11m (US$14 million) in extra costs.

“UK border strategy will be directly responsible for UK food inflation,” says Nigel Jenney, FPC chief executive.

The UK government is set to finalize its border strategy in the next few weeks.

“Highly inefficient border solution”
Jenney says that the new border measures will not only entail additional costs but also causes “delay and disruption.”

The FPC estimates lorries carry ten consignments on average.“The highly efficient logistics model widely adopted by our sector to deliver a complex range of highly perishable goods rapidly to several customers will be compromised at considerable additional cost,” he highlights.

The UK Cold Chain Federation also notes that these new importing food goods tax comes on top of vets’ costs, custom agent fees and increased supply chain costs. 

The charge will disproportionately affect small food outlets that import specialty food staples from the EU (French cheeses or Belgian chocolate, for example) that will have to face the same charges as big multinationals, according to the organization.

UK food inflation continues slowing for now
A snap shop price index carried out the first week of June shows UK inflation continues to decelerate, from 15.4% in May to 14.6% in June. Fresh food prices slowed down at a steeper rate, from 17.2% in May to 15.7% in June.

“Households up and down the country will welcome the easing of shop price inflation in June. Food inflation slowed for the second consecutive month, particularly for fresh products, as retailers cut the price of many staples, including milk, cheese and eggs,” says Helen Dickinson, chief executive at the British Retail Consortium (BRC).

While the BRC has expressed optimism about price inflation decreasing in the months ahead, the organization warns that UK authorities must legislate and govern with measures for this to happen. 

“If the current situation continues, food inflation should drop to single digits later this year. However, it is imperative that the government does not hamper this progress by introducing costly new policies,” Dickinson underscores.

“Reforms to the packaging Levy (Extended Producer Responsibility) and a new deposit return scheme could create an additional £4 billion (US$5.1 billion) burden on retailers and their customers. Along with a rise in business rates, and the introduction of border controls in October, these policies could hinder the government’s efforts to combat inflation.”

By Marc Cervera