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BREXit

Food prices ‘will not be affected by Brexit’

By Rick Pendrous+

10-Feb-2016
Last updated on 10-Feb-2016 at 17:00 GMT2016-02-10T17:00:16Z

Food prices 'would not rise' after a vote to quit the EU
Food prices 'would not rise' after a vote to quit the EU

Food prices in the UK would not go up, should voters choose to leave the EU in the forthcoming referendum on membership, according to a leading agricultural economist, who claimed the implications of a Brexit were more political than economic.

Although the EU maintained high agrifood tariffs, EU farm prices were now close to world market levels, said Alan Matthews, professor emeritus of European agricultural policy in the Department of Economics, School of Social Sciences and Philosophy at Trinity College Dublin, Ireland.

The UK imports two-and-half times more from the EU than it does from the rest of the world, Matthews told the Agriculture & Horticulture Development Board Outlook conference in London yesterday (February 9).

UK is a net importer’ of EU agrifood

“Except for fish, the UK is a net importer [of agrifood from the EU],” he said. “The picture that comes across is that the EU is a much more important trading partner for the UK than the UK is a trade partner for the EU. Obviously that has implications for the balance of advantage in terms of negotiations.”

While trade costs with the EU would add 5% to the cost of EU imports post Brexit, these costs would be offset by the removal of the tariffs on certain foods sourced from elsewhere, so the overall impact would probably be negligible, Matthews suggested.

“There would probably be some tariff protection required,” he said. But he added: “On balance, food prices would not be affected by Brexit.”

Trade policy dilemma

Much would also depend upon on what new trade agreements the UK managed to agree, both with the EU and globally. However, the trade policy dilemma the UK faced was that as it sought greater regulatory autonomy from the EU, this would come at the cost of increased trade costs, he added.

Matthews also noted that for agriculture, life outside the EU needed to be compared with what the Common Agricultural Policy and EU regulations might look like after 2020.

“My expectation is that future EU27-UK agrifood trade flows would remain duty free [post- Brexit],” he said.

However, he also expected the UK to stay outside of the single market, which would imply the introduction of border formalities, including along the Northern Ireland border, which together with other administrative barriers, could add to the bureaucracy involved in trade.

Matthews assumed that the UK government would continue to transfer public money to farming following an exit. But this could be conditional on farming practices and also could be for a transitional period, he warned.

The uncertainty surrounding what life outside the EU might mean for the agrifood sector, was a subject of deep concern for UK farmers, said AHDB chairman Peter Kendall, as he noted the “bloody tough year”, that farmers had just experienced.

“What is absolutely clear is there are no quick fixes out there at this time,” said Kendall. “We have to play the long game.”

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