The Great Divorce: Examining Brexit's Harsh Economic Divisions
The United Kingdom's decision to leave the European Union, commonly known as Brexit, has resulted in additional bureaucracy that has impacted households financially. Based on recent research, this additional administrative burden has led to an increase in food costs for every household by about £250 since the UK's departure from the EU.
The research analysis implies that the surge in food prices would have been nearly a third less severe, specifically 8 percentage points lower, if Brexit hadn't occurred. The rise would have been around 17% instead of the current increase of nearly 25%.
The annual rate of food price inflation in the UK is nearing record levels. Official figures indicate that the price of some essential goods has risen by up to 46% in a single year. This inflation exacerbates the existing financial pressure on households due to the cost-of-living crisis.
The researchers at the Centre for Economic Performance at the London School of Economics have calculated the total additional costs of Brexit-related paperwork for UK households to be £6.95 billion. They have been investigating the impact of trade barriers on food prices.
Non-tariff barriers that have been implemented since Brexit include customs checks, requirements for rules-of-origin, and health documentation for animals and plants. The researchers discovered that the prices of food products that the UK used to import in large quantities from the EU before the referendum increased by about 3.5 percentage points more than those that weren't as exposed to Brexit. They attribute these changes entirely to products with high non-tariff barriers.
Items like meat and cheese imported from the EU have seen price increases of about 10 percentage points more than similar products not affected by Brexit since the beginning of 2021, when the trade and cooperation agreement was implemented. The researchers assure that these price increases are directly linked to Brexit and not influenced by other factors such as Covid lockdowns or international events like Russia's invasion of Ukraine.
The researchers further warn that food inflation could worsen when the government introduces new border checks in October. These checks will include health certifications for imports from the EU of medium-risk animal products, plants, plant products, and high-risk food and feed of non-animal origin.
Official figures from the Office for National Statistics show that food CPI inflation is at 19.3%, which is only slightly less than March's 19.6%. Consumers are still grappling with substantial price increases on basic items like olive oil, which has risen 49% from a year ago, and baked beans, which have seen a 39% increase.
The economic toll of Brexit on the UK has been significant. A recent study by the Centre for European Reform estimated that Brexit has cost the UK £33bn in lost trade and investment. This figure represents a more severe economic impact than was previously anticipated.