Brexit: Fears of food and car price hikes amid UK-EU deadlock

Tom Belger
Finance and policy reporter
Chancellor of the Duchy of Lancaster Michael Gove hit out at the EU over a lack of progress in post-Brexit trade deal negotiations. (PA)

British consumers could face price hikes for European foods and cars next year, with post-Brexit trade talks at a stalemate despite a looming deadline for a UK-EU deal.

Britain and the EU are likely to slap new tariffs on some of each other’s goods and services if no deal can be reached before the Brexit transition period ends in 2021. The UK government signalled on Tuesday EU cars and agricultural goods would be among those facing import taxes, in a move designed to protect UK manufacturers and farmers.

Cabinet minister Michael Gove made no mention of any progress in a statement about negotiations with Brussels in the Commons on Tuesday, saying only that ongoing talks were “constructive.” Labour had demanded the update ahead of the government’s own June deadline for securing the “broad outline” for a deal.

Gove criticised the EU and accused it of an “ideological approach” to talks, admitting progress would be difficult unless the EU caved in on its demands.

READ MORE: UK government threatens to walk away from EU trade talks if no deal reached by June

He highlighted “differences of principle,” but told MPs there was still enough time to secure a deal. The government has previously said the broad outline of a deal needs to be agreed by June to be ready for 2021.

Both sides say they want a comprehensive free trade deal, but the UK government is resisting EU pressure to pledge alignment with EU standards on workers’ rights, tax, the environment and state aid. EU negotiators fear the bloc will be undercut if Britain de-regulates in such areas.

“The EU essentially wants us to obey the rules of their club even though we’re no longer members, and they want the same access to our fishing grounds as they currently enjoy, while restricting our access to their markets,” said Gove.

International trade minister Liz Truss also published the government’s post-Brexit tariff policy on Tuesday. Brexit allows the UK to set its trade policy independently of the EU for the first time in decades.

READ MORE: UK unveils new post-Brexit tariff regime

Business leaders said there would be winners and losers from the new policies, with higher tariffs typically protecting UK firms but lower tariffs bringing down prices for consumers.

The government will retain the same worldwide tariffs on agriculture, cars and fish that Britain had as a member of the EU. The move is aimed at insulating UK businesses from competition, but global trade rules mean the tariffs must also be applied to the EU itself if no trade deal is reached.

Such new tariffs on EU goods and services would mark a significant rupture to many UK firms’ supply chains across the bloc, reversing decades of increased ties. It would raise the cost of importing many common agricultural products and popular European cars, most likely pushing up prices for UK consumers.

Carmakers may welcome reduced global competition, but also fear UK tariffs could push up the cost of imported parts from the EU. Meanwhile retaliatory EU tariffs could make their cars uncompetitive in Europe. The government said on Tuesday respondents to its consultation had warned tariffs would “hugely impact UK competitiveness,” and that the UK could not produce its own replacements for currently imported parts.

Helen Dickinson, chief executive of the British Retail Consortium (BRC) also warned on Tuesday that families were likely to face higher food costs without an “essential” EU deal.

“UK consumers have become accustomed to a huge variety of affordable food thanks, in part, to tariff-free imports from the EU,” she said.

Dickinson added that trade talks needed to conclude soon to give retailers and border staff time to prepare, warning of disruption to food imports without sufficient preparation.

READ MORE: Ex-minister warns swift immigration crackdown risks frontline worker shortages

The potential tariff barriers come on top of so-called non-tariff barriers such as increased paperwork and goods checks, which are all but certain to come into force. Prime minister Boris Johnson’s government has effectively accepted higher costs and bureaucracy for EU trade are the price to pay for more freedom striking global trade deals.

But the government said on Tuesday the cost of many food imports from outside the EU would fall under its post-Brexit tariff plans. Duties will be slashed on around £62bn ($75bn) of imports, according to the department for international trade.

Products likely to see tariffs slashed on non-EU products include biscuits, waffles, pizzas, confectionery, spreads, cocoa and baking powder.

The department said 60% of imports would be tariff-free under the plans, though did not say what proportion is currently tariff-free. It added that an EU free trade deal could push this up to 87% of imports.