Post Brexit tariffs unlikely to affect UK food prices
Cutting tariffs on imports after Britain leaves the European Union will make little difference to prices paid by consumers in the shops, a leading economic think tank has said.
The Institute for Fiscal Studies (IFS) said that even if all tariffs were scrapped, the reduction in prices would be less than the increase which followed the referendum vote in 2016 as a result of the fall in the value of the pound.
Some supporters of Brexit have argued that the Government should take the opportunity to abolish tariffs unilaterally to lower prices for UK consumers, bringing down the cost of living.
However the report by the IFS said tariffs imposed by the EU on the sort of goods imported into the UK were “not particularly high” – averaging around 2.8%.
Even under some “quite optimistic assumptions” about the likely effect on prices paid by households, it said the complete abolition of tariffs would lead to a reduction of between 0.7% to 1.2%.
That compares with the estimated 2% increase in consumer prices which resulted from the depreciation of sterling following the Brexit referendum.
The IFS said that while getting rid of tariffs could bring economic benefits in the long run, it could be “very damaging” for some UK firms in the short term.
At the same time, the report said that any benefits to consumers from abolishing tariffs had to be set against the “inevitable costs” to UK trade that would result from leaving the EU customs union.