Families face £500 hike in bills after Brexit no deal

Millions of families face a £500 hike in household bills if Britain leaves the EU without a Brexit deal, a report warns today. 

The Resolution Foundation said the poorest would be hit hardest by the imposition of World Trade Organisation (WTO) tariffs on imports to Britain from Europe. 

Currently huge amounts of goods such as food and cars are imported to Britain without any additional costs for crossing the border under single market rules.

Leaving the EU means these rules must be replaced or WTO defaults will kick in. 

Millions of families face a £500 hike in household bills if Britain leaves the EU without a Brexit deal if tariffs impose price rises on groceries and other goods 

The Resolution Foundation said the average yearly household bill would rise by £260 in a ‘no deal’ scenario.

And three million families could see price rises of more than £500. 

Transport Secretary Chris Grayling said on Sunday British farmers would produce more food at home to limit the impact of any price increases.

The Brexit department did not dispute the report’s findings but insisted the Government was focused on securing a good deal with the EU.

The impact on the poorest fifth of households would be 33 per cent greater than on the richest fifth, the joint report by the Resolution Foundation and Sussex University’s UK Trade Policy Observatory found.

REPORT: NO DEAL WOULD HIKE COSTS 

An analysis of a ‘no deal’ scenario where the UK imposes WTO ‘most favoured nation’ tariffs on the EU has forecast big price rises.

The Resolution Foundation tariffs on dairy imports would rise by 45 per cent, meat products by 37 per cent, and clothing, footwear, drinks and tobacco by 10 per cent.

These tariffs would feed through into significant price increases: 

• Dairy up 8.1 per cent
• Meat up 5.8 per cent 
• Cars and other vehicles up 5.5 per cent 

It shows that walking away from deadlocked Brexit negotiations would be the ‘worst possible outcome’, the authors said.

The analysis of a ‘no deal’ scenario where the UK imposes WTO ‘most favoured nation’ tariffs on the EU found that levies on dairy imports would rise by 45 per cent, meat products by 37 per cent, and clothing, footwear, drinks and tobacco by 10 per cent.

These tariffs would feed through into significant price increases, with the average price of dairy goods rising by 8.1 per cent, meat products by 5.8 per cent and cars and other vehicles by 5.5 per cent, the report said.

The hit to living standards would be greater for lower-income households as they tend to spend a greater share of their income on food and essential items of clothing which would be most affected by new tariffs.

A different ‘no deal’ Brexit scenario, in which the UK unilaterally reduces all tariffs to zero, would reduce household spending by an average of £130 a year.

Tariffs on vehicles adding five per cent to imports could be imposed if Britain leaves the EU without deal 

But this is unlikely to happen as it would reduce Britain’s ability to strike free trade deals around the world, and expose some industries to ‘sharp competitive pressures’ as other countries would not be obliged to reduce their own tariffs.

Stephen Clarke, economic analyst at the Resolution Foundation, said: ‘The Government has said that while it wants a comprehensive trade agreement it is also preparing for a ‘no deal’ scenario when we leave the EU.

‘Such an outcome – which could see the UK imposing tariffs on EU imports – would increase the annual shopping bills of millions of households by £500, with poorer families taking the biggest hit.

‘While trade may not have been the biggest issue in the referendum, it is one that will affect the day-to-day living standards of every family in Britain.

‘The Government must rightly continue to prioritise a comprehensive new trade agreement with the EU in order to avoid households having to fork out for a ‘no deal’ outcome through higher prices and squeezed households budgets.’

Transport Secretary Chris Grayling said on Sunday British farmers would produce more food at home to limit the impact of any price increases

Ilona Serwicka, research fellow at Sussex University, said: ‘Our research shows that this (no deal) scenario will increase the cost of essential goods, such as food and clothes, which will impact most adversely on those households who already struggle to get food on the table and make ends meet.

‘To avoid the real economic danger of a ‘cliff-edge’ scenario – that will see the cost of living for households up and down the country go up – the UK Government must realise that walking away from the negotiating table is the worst possible outcome.’

Shadow Brexit minister Jenny Chapman said: ‘This report is further evidence of how a no deal Brexit will hit family budgets and the potential dire consequences of the Government’s chaotic handling of the Brexit negotiations.

‘Britain crashing out of Europe without a deal is simply not a viable option. No deal risks price hikes in the shops as a result of extra charges on everyday items, such as food and drink. And yet, the only solution ministers have offered to this potential crisis is ‘dig for no deal’.

‘Theresa May must use this week’s EU Council meeting to end the deadlock in Brexit negotiations and protect Britain from an economic cliff edge. That means agreeing strong transitional arrangements within the single market and a customs union.’ 

A Department for Exiting the EU spokesman said: ‘We want a deep and special future partnership with the European Union and we are optimistic about achieving this.

‘It’s in everyone’s interests we get a free trade agreement that allows for the most frictionless trade in goods and services.’

 

 

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