Brexit fees on food imports ‘will increase prices’

New import regulations are likely to increase food prices in British shops.

The Brexit-related Common User Charge will apply to imports of plant and animal products, such as cheese, fish and sausages as well as seeds and cut flowers, entering the UK from the European Union through the Port of Dover and Eurotunnel from 30 April.

Charged per type of product imported, the fee will range from £10 to £29 depending on whether the goods are classed as low, medium or high risk. It will be capped at £145 for mixed consignments.

Trade groups criticised the short notice ahead of implementation, and warned that the additional fees will potentially lead to higher prices and reduced choice in the shops.

Cold Chain Federation chief executive Phil Pluck said that the charges would have to be passed on to “either the EU importer, the smaller UK retailer, or the UK consumer”.

He added: “Ultimately, this will increase business costs and food prices and potentially lower choices for the shopper.”

James Barnes, chairman of the Horticultural Trades Association, said the policy “feels like it is constructed on the back of an envelope at best” and that the charges would “undoubtedly increase costs” and increase the likelihood of empty shelves in supermarkets.

The UK government said that the fees were “designed to recover the costs of operating our world-class border facilities where essential biosecurity checks will protect our food supply, farmers and environment against costly disease outbreaks entering the UK through the short straits”.

Brexit led to higher food bills, study finds

Leaving the European Union added a total of £5.8bn or an average of £210 per household to UK consumers’ food bills over the two years to the end of 2021, according to new research.

The analysis by the Centre for Economic Performance (CEP) at the London School of Economics showed that Brexit alone had increased UK food prices by 6%.

As low-income households spend a greater share of their income on food, this had a proportionately greater impact on the poorest people.

The CEP study found that Brexit accounted for a 1.1% rise in the overall cost of living for the poorest 10% of households, compared with the 0.7% rise in living costs felt in the top 10% of households.

Looking at the mechanisms behind the price rises, the study authors noted that trade within the EU “goes far beyond the elimination of tariffs within its borders: it also minimises non-tariff barriers to trade through, for example, mutual recognition of standards”.

While the Trade and Cooperation Agreement, which came into force in January 2021, ensures that trade between the UK and the EU remains tariff-free, there are more now non-tariff barriers between the UK and the EU compared with trade pre-Brexit.

It is these non-tariff barriers that have affected prices, the research showed.

“In leaving the EU, the UK swapped a deep trade relationship with few impediments to trade for one where a wide range of checks, forms and steps are required before goods can cross the border,” explained study co-author Richard Davies, an associate of CEP’s growth programme and a professor at Bristol University.

“Firms faced higher costs and passed most of these onto consumers. Over the two years to the end of 2021, Brexit increased food prices by around 6% overall.”

Study co-author Nikhil Datta, an associate of CEP’s labour markets programme and an assistant professor of economics at Warwick University, added: “The policy implications are stark: non-tariff barriers are an important impediment to trade that should be a first-order concern, at least on par with tariffs, for policymakers interested in low consumer prices.”

Brexit has harmed Britain’s competitiveness, report finds

Leaving the European Union has damaged Britain’s competitiveness and will make the country poorer in the coming decade, according to a new study.

Think tank the Resolution Foundation said that Brexit has reduced how open and competitive Britain’s economy is, which will hold back productivity and wages — leaving the average worker poorer than they otherwise would have been.

The Big Brexit provides a detailed assessment of the ongoing impact of the UK’s Trade and Cooperation Agreement (TCA) with the EU, and what the lasting effects of Brexit are likely to be on workers, firms and industries throughout the UK.

It says that the initial impact has been a “depreciation-driven inflation spike” increasing the cost of living for households, and business investment falling.

Following the introduction of new post-Brexit trade rules in January 2021 the UK has not seen a large relative decline in its exports to the EU that many predicted, although imports from the EU have fallen more swiftly than those from the rest of the world.

But while the UK has avoided a large relative fall in EU exports, the report notes this is in part because the impact of Brexit appears to be a more general reduction in openness and competitiveness.

Britain has experienced a sharp decline in trade openness (total trade as a share of GDP) since 2019 — a fall of 8 percentage points. France, which has a similar trade profile to the UK, has experienced a far drop of 2 percentage points over the same period.

The full effect of the TCA will take years to be felt but this move towards a more closed economy will make the UK less competitive, which in turn will reduce productivity and real wages, the report explains.

The authors estimate that labour productivity will be reduced by 1.3% by the end of the decade due to the changes in trading rules alone. This will contribute to weaker wage growth, with real pay set to be £470 per worker lower each year, on average, than it would otherwise have been.

London loses over 7,000 finance jobs to EU post-Brexit

More than 7,000 jobs in the financial services sector have moved from London to the European Union as a result of Brexit, according to the latest Brexit tracker from consultancy EY.

This estimate is a decrease of 400 from the total anticipated in December, and is down from the 12,500 job moves forecast by firms in 2016.

EY noted, however, that 44% (97 out of 222) of the largest UK financial services firms have moved or plan to move some UK operations and/or employees to the EU since the referendum.

“Staff and operational moves across European financial markets will continue as firms navigate ongoing geopolitical uncertainty, post-pandemic dynamics and regulatory requirements,” said Omar Ali, EMEIA financial services leader at EY.

Dublin is the most popular destination for employee relocations and new European hubs or offices, with 36 financial services firms announcing intentions to relocate UK operations and/or staff to the city. Luxembourg is in second place, attracting 29 companies, followed by Frankfurt with 23 companies and Paris with 21.

Paris scores highest in terms of attracting jobs from London, with a total of around 2,800, followed by Frankfurt at 1,800, and Dublin with 1,200.

The tracker also shows that since the referendum, 24 firms have publicly declared they will transfer just over £1.3tn of UK assets to the EU. There was a last-minute increase in firms announcing asset moves in the months before the end of the transition period on 31 December 2020, when it became clear that the UK-EU trade deal would not offer concessions for the UK’s financial services sector.

Brexit ‘causing extra costs and delays’ for UK firms

UK businesses have seen increased costs, paperwork and border delays as a result of Brexit, MPs have said.

The European Union introduced full import controls at the end of the transition period on 31 December 2020.

A report by the the Public Accounts Committee said that since then, although UK trade volumes been suppressed by the impact of Covid-19 and wider global pressures, “it is clear that EU exit has had an impact, and that new border arrangements have added costs to business”.

The spending watchdog added that it has “repeatedly raised concerns about the impact of changes to trading arrangements on businesses of all sizes and we remain concerned”.

Britain’s implementation of post-Brexit import controls has been delayed three times over the past year.

“One of the great promises of Brexit was freeing British businesses to give them the headroom to maximise their productivity and contribution to the economy — even more desperately needed now on the long road to recovery from the pandemic,” said Meg Hillier, chair of the Public Accounts Committee.

“Yet the only detectable impact so far is increased costs, paperwork and border delays.”

Hillier added that the UK government should be doing more to understand and minimise the current burden on those trading with the EU, to address the immediate delivery and readiness risks in introducing import controls, and to have a border in place that operates effectively without further delays or temporary measures.

Brexit-related exodus of financial services jobs and assets slows down

UK financial services firms are continuing to move jobs and assets to the European Union but at a slower rate, the EY Financial Services Brexit Tracker shows.

According to the latest data, 95 of the 222 financial services firms monitored by the tracker (43%) have publicly stated they have moved or plan to move some UK operations and/or staff from the UK to Europe. This takes the total number of job relocations since the EU referendum to almost 7,600, up from 7,500 in October 2020.

An estimated total of almost £1.3trn of UK assets will be transferred to the EU by financial services firms as a result of Brexit.

“After the major hurdle of standing up new EU hubs, the days of significant swathes of asset and job relocation announcements appear to have passed and will likely be replaced by the slower yet ongoing movement of people and assets to Europe for compliance purposes,” said Omar Ali, EMEIA Financial Services managing partner for client services at EY.

Dublin and Luxembourg remain the most popular EU destinations for staff relocations, new European hubs or office relocations.

Meanwhile, over a quarter (26% and 57 out of 222) of firms have publicly stated that Brexit is impacting or will negatively impact their business, up from 49 firms in January 2020.

With the negative financial impact of leaving the EU still being felt in the financial services sector, firms have called on the government to ensure the UK maintains a cooperative trading relationship with the bloc.

Since late December 2020, four global wealth and asset managers with combined assets under management of over $10trn have called for greater clarification over the UK’s future regulatory regime, arguing for greater alignment rather than divergence from Europe, focused on establishing a flexible, cooperative relationship with the EU.

“Specific policy work to align the UK and its closest trading partner remains crucial and will be mutually beneficial – uncertainty has been a thorn in the sector’s side for nearly five years,” Ali added.

Long-term impact of no-deal Brexit ‘worse than Covid-19’

Leaving the European Union without a trade deal would have a bigger impact on the UK economy in the long term than the damage caused by Covid-19, the Bank of England governor has warned.

Speaking to MPs on the Treasury Select Committee, Andrew Bailey said that a no-deal Brexit would cause disruption to cross-border trade and damage the goodwill needed to build a future economic partnership.

If the UK fails to agree to a deal before the Brexit transition period expires at the end of December it will revert to World Trade Organisation tariffs and trade barriers with its biggest trading bloc.

The central bank governor acknowledged that the fallout from the pandemic and the second national lockdown in England was having a greater short-term impact on the economy.

But he argued that in the longer term, the economic cost of leaving without a deal would be larger than the cost of Covid.

“It takes a much longer period of time for what I call the real side of the economy to adjust to the change in openness and adjust to the change in the profile of trade,” Bailey said.

In September, an analysis by the London School of Economics and UK in a Changing Europe concluded that the long-term economic impact of a no-deal Brexit could be two or three times as large as that of the pandemic.

Housing price slowdown in Q1 2019

The Halifax survey of British house price growth shows a slowdown in the first quarter of 2019 in annual terms and a subdued outlook, according to Reuters.

Uncertainty about Brexit and high property prices were cited as key factors behind the trend. Compared to the same period in 2018, prices rose by 2.6% whereas the three months to February showed a 2.8% rise.

A Reuters poll of economists indicated an annual rise of 2.3% could be expected for the first quarter. A recent Nationwide mortgage lender survey found house prices had increased somewhat.

The housing market in London is particularly weak, with Brexit uncertainty poised to have a particularly strong impact in the capital. Shortly before the 2016 referendum house prices were rising by around 10% per year.

Halifax says that in March, in monthly terms prices were falling by 1.6% after a 6.0% increase in February. Halifax’s index has tended to show a more marked variance than other polls in recent times.

UK consumers rising despite Brexit fears

January saw increased borrowing by British households, indicating that private individuals in the UK have more confidence in the economy than businesses, according to Reuters.

The month saw the largest number of mortgages approved for house purchase than any forecast in a Reuters poll of economists, reaching 66,766 in January. In December the figure was 64,468.

In the same period, consumer borrowing increased almost £1.1bn, also exceeding the predictions of the Reuters poll.

The annual growth rate in unsecured consumer lending was reduced to 6.5%, the weakest level in four years, according to figures from the Bank of England.

The economy of the UK has slowed sharply in anticipation of Brexit, which is officially scheduled to occur at the end of March. UK Prime Minister Theresa May recently opened the way for a delay to this leaving date, subject to approval from parliament.

The UK manufacturing sector slowed in February, according to a recent survey.

No deal Brexit could push UK house prices down 3%

A Reuters poll has revealed that Brexit is likely to result in a modest change in UK house prices, with London properties being impacted to a greater degree.

A no-deal Brexit would likely result in a 3 per cent decrease in London house prices over 6 months, while national property values would drop by 1 per cent. The survey was carried out between 13-20 February 2019.

Tony Williams of property consultancy Building Value said: “There will be a palpable shock to the UK economy in terms of GDP, inflation, job creation etc.

“This will spill over dramatically to the residential market, with London bearing the brunt given the international catchment of prospective buyers.”

Williams predicted that London property prices would fall 10% in the event of a no-deal Brexit.

However, a dramatic Brexit could see the value of Sterling fall 5-10 per cent, which would make investment more attractive to overseas buyers and offset some of the market problems.

Another poll said UK property prices would rise 1.5% in 2019 and 1.8% in 2020, a fall from earlier predictions. In London, property prices are predicted to fall 2.0% in 2019.