Brexit has been a thorn in the side of stakeholders trying to figure out how trade relations will shake out once the U.K.’s divorce from the European Union is finalized, and a new report points to impending price hikes if new U.K. trade deals aren’t settled.
In a report released Tuesday, the British Retail Consortium (BRC) said from the time the U.K. leaves the EU—which is slated for March 30, 2019—it will no longer benefit from the zero or low tariff rates and reduced trade barriers it enjoys under the EU’s trade deals, which will likely mean higher tariffs for companies and higher prices for consumers.
“A deal with the EU that enables lasting tariff-free trade with the EU is make or break to the supply and affordability of items that ordinary U.K. shoppers purchase every day,” the report noted.
Currently, according to BRC, 29 percent of U.K. retailers’ imports are traded under EU deals, 29 percent under the Generalized System of Preferences program (GSP) and just 6 percent are traded as part of bilateral trade deals the U.K. has with other nations.
If new trade deals aren’t put in place before the separation, clothing will be one product category that will be “particularly affected,” BRC said.
“New or higher tariffs inevitably mean consumers would face higher prices in their everyday shop, as staple products such as fruit, vegetables, fish, and clothing would be hardest hit,” Andrew Opie, director of food and sustainability at the British Retail Consortium, said. “Price increases of any scale would add to the burden of hard-pressed consumers whose finances are already being squeezed by inflationary pressures.”
As it stands, the EU pays zero tariffs for clothing imports from Turkey, one of its biggest trading partners in the sector, and once the U.K.’s on its own with no trade deal, the tariff rate would be 12 percent. That would make a $5 T-shirt cost $5.60, which could very quickly add up to a substantial extra expenditure.
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“South Africa and Turkey are the most important bilateral deals for the UK as we import significant amounts of fruit, veg and wine from the former and clothing and electrical goods from the latter,” the report noted. “The impact on the cost of goods of no deal with these countries would be the greatest.”
Bilateral trade deals will be of particular importance to the U.K., and as evidenced by its just 6 percent of goods traded under bilateral trade deals, the country will have its work cut out. It will also be missing out on the slew of trade deals the EU currently has in works, like the recently implemented agreement with Canada and one underway with Japan.
Without these deals, the added costs of doing business that paying new tariffs would bring, could be passed on to the consumer.
“While securing a deal with the EU to enable tariff-free trade to continue remains the priority, the deals the EU has negotiated with countries around the world also contribute to the choice and affordability of goods that U.K. shoppers purchase every day. People need reassurance from Government that these deals will be transferred in time to ensure that U.K. consumers don’t lose out,” Opie said. “Now that an agreement has been reached to move the negotiations on to trade, the focus must be on securing the continuity of free trade with Europe, alongside replicating these existing agreements with countries outside of the EU. These are the crucial next steps that Government needs to take to avoid a cliff-edge situation on Brexit day and to deliver a fair Brexit for consumers.”