Research published today by Barclays shows that a no-deal Brexit model would create an average tariff of 27 per cent for food and drink supply chains.
The grocery industry operates on very thin margins, typically around 3–5 per cent, meaning that additional cost are extremely likely to end up being passed on to consumer.
The new Barclays report, Scale, Disruption and Brexit – a new dawn for UK food supply chains? adds that every consignment of goods from the EU will require a customs declaration which starts at a minimum of £50.
Last year, the UK imported £48 billion worth of food and drink from the EU, approximately 40 per cent of the total UK market.
Of these imports, 71 per cent entered the UK free of customs duties and other trade costs.
Last week saw the European Union reject Prime Minister Theresa May’s so-called Chequers plan for Brexit. Britain is due to depart the EU in March of next year.
The report adds that a free trade deal or the Chequers option would help the food industry avoid tariffs and related duties.
Ian Gilmartin, head of retail at Barclays Corporate Banking, said: “The food and drink industry is one of the country’s most important sectors, employing millions of people across the UK.
“For the good of both UK business and consumers, the potential impact on our producers and grocery retailers should be front and centre of Brexit negotiations.
“Some products would avoid tariffs, even in a no-deal scenario, but for most goods the effect of an increased tariff burden would be extremely damaging, and cheaper goods would be the hardest hit.
“A positive agreement on trade is essential if we are to protect UK exporters and avoid significant price rises for UK consumers.”
The report adds that a full customs union would maintain the current tariff-free trade enjoyed by the UK and the EU but would limit the UK’s ability to trade unilaterally with other countries.
A free trade agreement would be likely to minimise the amount and cost of new tariffs imposed on trade but would still require extra fees from logistics, such as customs declarations.
In addition to customs declarations, comes the burden of complying with stringent EU Sanitary and Phytosanitary (SPS) regulations, which could be the equivalent of paying an extra 8 per cent in duty tax on EU food and drink imports.