‘Price hikes and shortages’
WARNINGS A NO-DEAL BREXIT AND COVID COULD SEE FOOD BILLS RISE
RETAILERS are warning of price hikes and shortages as the UK moves closer to stumbling out of the EU in three weeks’ time.
With desperate, last-minute negotiations unlikely to go past Sunday, there are warnings that a combination of factors – with Brexit at the centre – will start impacting on prices in the spring.
The Office for Budget Responsibility has suggested a no-deal outcome could knock another 2 per cent off the size of the economy in 2021 – on top of the 4 per cent hit even if a deal is struck – while driving up inflation and unemployment.
It said unemployment, at 4.8 per cent in the third quarter of 2020, could peak at 8.3 per cent in the third quarter of 2021 if there is no deal.
Bank of England Governor Andrew Bailey has warned the longterm damage caused by a no-deal situation would be worse than the economic hit from coronavirus, and Tesco chairman John Allan has suggested food bills could rise by as much as 5 per cent as a result of the tariffs and disruption.
The British Chambers of Commerce, meanwhile, has said businesses are being left in the dark about how to prepare.
Interviewed on the BBC, Foreign Secretary Dominic Raab sought to play down the impact on food prices if the UK defaults to World Trade Organisation (WTO) rules with the EU, but acknowledged there will be “bumps along the road” if there is no deal.
The pound slid to a two-week low against the dollar yesterday morning after the crunch talks in Brussels between Boris Johnson and European Commission president Ursula von der Leyen failed to produce a decisive breakthrough.
By 9.30am, the pound was down almost 1 per cent against both the dollar and the euro.
Connor Campbell, a financial analyst at SpreadEx, said: “Sterling took little comfort from the announcement of a new – and, this time, likely permanent – Brexit deadline.”
The founder and managing director of one big online retailer said consumers should prepare for price hikes for many goods due to what he called a “triangle of change” in 2021.
Paul Hambidge, who runs East Midlands-based flooring retailer Factory Direct Flooring, said Brexit, a big rise in shipping costs, and an expected spike in demand will hit prices in the spring.
Back in the summer the business, which has a shop in Hinckley and warehouses in Nuneaton, said they had seen a 40 per cent increase in online orders – worth “millions” – to households due to an uplift in home DIY during the first lockdown.
However, Mr Hambidge said shipping lines had put their prices up drastically over the last few months, and importers and retailers were stockpiling pre-Brexit.
He said: “It’s a trio of change that has arisen due to the Covid-19 pandemic and people stockpiling, shipping lines raising their prices and the inevitable Brexit change which is going to be the perfect storm next year that I wanted to highlight to customers.
“But not just for flooring, this is something that is hitting all online and offline businesses for all goods in the coming year, and it’s time to be a little bit savvy about it.”
The British Chambers of Commerce warned company bosses were still short of official information available in 24 critical areas, including:
■ Not knowing what rules of origin will apply after the transition period;
■ Having limited guidance on procedures for shipping goods from Great Britain to Northern Ireland;
■ Not having the 10-digit tariff codes they need and ongoing doubts about the final WTO most-favoured nation tariff rates;
■ No information on how UK tariff rate quotas will be administered or how businesses can access them beyond the transition period.
British Chambers director general Adam Marshall said: “Posters and television adverts are no substitute for the clear, detailed and actionable information businesses require to prepare for the end of transition.
“If a breakthrough happens, the two sides must immediately set to work on pragmatic steps to smooth the introduction of the new arrangements from January, including easements for genuine administrative errors, clear procedures at ports, and fast help from customs authorities.”
Scott Knowles, chief executive of East Midlands Chamber, said: “The current stalemate is undermining (businesses’) ability to prepare for change on January 1.
“There’s still many critical areas where they need answers.”