New Brexit checks to cost firms £2bn and raise food prices

Ministers last week revealed that businesses could be charged up to £145 for each imported consignment prompting warnings that this would drive up food prices and disproportionately hurt small businesses.

The UK rejected the assessment about higher food prices from the new checks, and said it "did not recognise" the figures in the Allianz report.

READ MORE: 'Brexit costing Scotland up to £100m a year in lost salmon exports'

The Allianz report said that the checks, part of the government’s “border target operating model” (Btom), would affect £21bn of agricultural product imports, including eggs, live trees and plants, meat and fish, covering about 3% of all UK imports.

These new costs were the equivalent to adding a 10% tariff on these imports, it said, with Allianz indicating that EU companies would be likely to pass on these costs to UK customers.

It said these items accounted for about 6% of the overall basket of goods used to calculate the UK’s headline inflation rate, and that the additional costs could add 0.2 percentage points to inflation, with dairy, meat and fish most affected.

READ MORE: Brexit has dealt major blow to UK economy says Goldman Sachs

Inflation has fallen back from over 10% last year to 3.4%, helped by steadying food prices after the sharpest annual increase since the late 1970s. However, food prices are still 30% higher than three years ago.

The Allianz report found the inflationary pressures from the new checks would be tempered by a two-year suspension of tariffs on goods not covered by free trade agreements, which would cut import costs by £7bn. This included some agricultural products but also cars, fuels, metals and other non-food goods.

The report comes as UK firms also face the prospect of tougher barriers to exporting to the EU as the UK steadily falls behind the introduction of new rules set by Brussels.

A separate study by UK in a Changing Europe, an academic thinktank, said UK companies would have “little choice” but to follow new EU standards currently being pushed through the Strasbourg parliament before elections in June.

It said the EU was going into “legislative overdrive” to complete reforms before the summer, while the UK government’s agenda had “all but dried up” as the general election loomed.

Joël Reland, a research associate at UK in a Changing Europe, said: “The UK is living next door to a regulatory behemoth, which it cannot afford to ignore. Even after Brexit, the EU remains the UK’s chief export market, so British businesses have little choice but to conform with new EU regulations.

“The main difference is that now the UK government has no means of influencing EU policy decisions from the inside.”

The SNP’s Europe and EU accession spokesperson Alyn Smith MP said: “With Labour and the Tories both committed to Brexit, independence is the only way for Scotland to re-join the EU single market and customs union to stop the onslaught of Brexit. 

“Brexit has been a disaster from the beginning with businesses and household budgets in Scotland paying the price for Brexit and Tory government policies - none of which we voted for.

“Every week we see further evidence that Brexit isn’t working, indeed it is actively damaging businesses and our economy. 

“But Sir Keir Starmer has made it clear things won’t change under a UK Labour government.

“The SNP are the only party offering the people of Scotland an escape from broken Brexit Britain and a route back into the EU - and the world's largest single market - through independence.”

A UK government spokesperson said: “We do not recognise these figures. These checks will have a minimal impact on food prices and consumers, while saving traders and businesses around £520m each year compared to the model originally proposed.

“Our border checks are fundamental to protecting the UK’s food supply chain, farmers and natural environment against costly diseases reaching our shores.”