The research showed that the risk of higher costs from new tariffs is greatest for food and drink that comes from the EU. The exposure of this market to imports from the EU is the highest compared with any other retail sector, with more than 70 per cent of UK food and drink imports originating from within the EU.
The standard rate of tariffs that would apply to imports of EU food and drink is far higher than the rate for non-food goods, with duties for some meat and dairy products rising to 80 per cent, the report said.
It added that the EU is likely to demand compliance with a wide range of non-trade regulations which may be difficult for the UK to accept if it wants to keep tariff-free trade in food and drink after Brexit,
The report said that potential alternative non-EU sources of food and drink are limited by either high tariffs and/or non-tariff barriers.
Richard Lim, chief executive of Retail Economics, said: “Should the Government fail to agree a deal with the EU, the retail industry faces a debilitating wave of rising costs from import duties. Extensive research has been carried which reveals an additional £7.8bn could be added to the cost of retail goods should a hard Brexit scenario become a reality.
“Food retailers would face the toughest challenge, given that almost three-quarters of what we eat is imported from the EU. Some tariffs on meat and dairy products would rise to more than 80 per cent causing an inevitable surge in food inflation to hit families.
“The retail industry is already delicately poised between an outlook of softening consumer demand and mounting cost pressures, evidenced by recent high-profile retail administrations. Additional costs of this magnitude will amount to a ‘tipping point’ with some retailers unable to remain commercially viable.”