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UK Food Prices and Cost of Living Higher due to Brexit

In: Finance, Forex

Brexit-related trade barriers have driven a 6% increase in U.K. food prices, adding to a squeeze on consumer spending power, according to a new report.

Inflation for food products Britain tends to import from the European Union, like fresh pork, tomatoes and jam, was more pronounced than things like tuna and exotic fruits that come from other nations, according to the London School of Economics’ Centre for Economic Performance. The study covered two years to the end of 2021 and attempted to strip out the effect of the pandemic.

The figures underscore the economic pain stemming from Britain’s decision to exit the EU’s single market and customs union. That led to an increase in regulatory and border checks on goods, boosting shipping costs. Most of the increase in prices happened after the trade deal governing Britain’s exit from the EU came into force in January 2021.

U.K. Prime Minister Boris Johnson was elected on a promise to “get Brexit done” in December 2019, with Britain formally leaving the bloc in January 2020.

Food products were among the most exposed categories to new health checks and border delays, resulting in a drop in imports and higher prices, the report said.

Consumer prices rose 7% across the U.K. economy in March, the biggest jump in three decades. While most of that was due to energy prices, with scarce natural gas supplies driving up the cost of electricity, food is also a major driver of inflation.

The Bank of England has increased interest rates three times since December, with a fourth rise to 1% expected in May, to keep a lid on price growth. Chancellor of the Exchequer Rishi Sunak has focused aid on people with jobs, prompting criticism that he should do more for all parts of society.

While Brexit is not the main driver of rising inflation or the cost-of-living crisis, this report provides clear evidence that it has led to a substantial increase in food prices, which will hit the poorest families hardest.

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