Allianz Trade Warns of a 10% Increase in Costs for Imported Animal and Plant Products Starting 30 April Due to New Measures
Imminent UK Border Controls Set to Cost Businesses £2 Billion and Escalate Inflation, New Report Finds
A recent report has raised concerns over the financial and trade implications of upcoming post-Brexit UK border controls. Set to take effect later this month, these controls are forecasted to inflict a £2 billion cost on British businesses and contribute to rising inflation levels. The report underscores the potential detriment to UK-EU trade relations, stemming from the new regulatory measures.
As the deadline for the implementation of new checks on animal and plant products approaches on 30 April, Allianz Trade has highlighted the economic strains expected from the Brexit agreement negotiated under Boris Johnson’s leadership. The insurer estimates a 10% surge in import costs for the first year, a move that could notably affect the price landscape for UK consumers and businesses alike.
Recent disclosures from ministers have revealed potential charges of up to £145 per consignment for goods imported through key points like Dover. This development has sparked concerns about escalating food prices and the disproportionate impact on small businesses. Allianz Trade’s analysis points to a broad effect on agricultural imports valued at £21 billion, equating to roughly 3% of the UK’s total imports. The imposition of these measures is likened to a 10% tariff, suggesting that EU suppliers might shift these additional costs to UK consumers.
The report elaborates on the broader economic ramifications, indicating that these imported items constitute about 6% of the goods basket used to calculate the UK’s headline inflation rate. An anticipated addition of 0.2 percentage points to inflation is foreseen, with sectors like dairy, meat, and fish poised for the most significant impact.
Despite a reduction in inflation from over 10% last year to 3.4%, aided by declining food prices, the cost of food remains significantly higher than in previous years. The government had previously estimated the annual cost of these checks at an additional £330 million, with a minor projected increase in food inflation over three years.
However, Allianz Trade also notes potential mitigating factors, such as a two-year tariff suspension on certain imports, which could decrease import costs by £7 billion and reduce overall inflation by 0.6 percentage points over the next year.
Phil Pluck, Chief Executive of the Cold Chain Federation, has expressed concerns about the efficacy of the government’s border operating model, suggesting it could undermine business confidence and add to consumer costs.
This report coincides with warnings that British firms may face tougher exporting barriers to the EU, as the UK lags in adapting to new EU regulations. A study by UK in a Changing Europe suggests UK businesses will likely need to comply with emerging EU standards, highlighting a growing divergence in regulations on supply chains, digital competition, and environmental standards.
The government, however, disputes these findings, arguing that the impact on food prices and consumers will be minimal, and that the new checks are crucial for safeguarding the UK’s food supply chain and environmental health.
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