Marmitegate

A very public standoff emerged this week between the UK’s largest supermarket chain, Tesco, and multinational brand giant, Unilever. The supplier attempted to raise its prices by 10%, citing an increase in costs due to Brexit, but Tesco refused to accept the change. Products, most notably Marmite, were withdrawn from its website and began to disappear from store shelves as stock levels fell. It later emerged that Unilever was trying to use Brexit as a smokescreen to cover general price hikes, and the two came to a negotiated solution, but it does foreshadow real problems to come.

The Pound has fallen 16% against the Euro since the referendum result (to its lowest in 5 years, or 31 years against the US Dollar, pushing us down to 6th place in global GDP rankings), with the biggest single falls on the night of the vote and on the government’s indication that its current intent is to leave the single market. It’s a simple economic fact that a weaker currency increases the relative cost of imported goods. Given that 40% of our food is imported, and supermarkets already have slim profit margins due to increased competition, it’s inevitable that consumers will see price rises at some point.

We warned this would happen, evidenced by the strong correlation between the strength of the Pound and the referendum polls over the course of the campaign. Once we actually leave the EU, we will also lose our funding from the Common Agricultural Policy, among a great deal of other benefits. Unless the government commits to matching the funding for farmers (causing further budgetary problems in the absence of the imaginary £350m per week – incidentally now worth £420m from some perspectives), domestic prices will also have to rise to make up for the shortfall.

The problems could be compounded if we fail to secure adequate trade deals in the upcoming negotiations, especially if we do leave the single market. A new report by the British Retail Consortium has warned that if we are forced to revert to World Trade Organisation rules after Brexit (implementing tariffs), the cost of imported meat could rise by up to 27%, among a range of estimates for other produce.

When faced with the question of increased food costs, Leave campaigners would always cite the example of New Zealand lamb, and continue to do so today. They claim EU quotas on its import have driven up the price for consumers; the apparent result is a cost 50% higher per kilogram than in America. There may be some truth in this, but we are the second biggest export market (falling behind China in 2012) so the impact can’t be particularly significant, and we are also substantially further from New Zealand than the US is.

“Access for New Zealand’s biggest exports to the UK are tied to quotas to the EU. Unpicking the quotas… would also disrupt trade with the EU and cause major uncertainty.”

Ben O’Brien, Beef + Lamb NZ

Another argument is that being able to slash EU regulations after Brexit will bring down costs for both companies and consumers. But EU regulation is not the affliction it has long been portrayed as. The rules around food ensure we have the safest and highest quality in the world, while also ensuring we have sustainability and protect the environment, securing longevity of supply. Furthermore, reductions in regulation would place restrictions on British exports to the rest of the EU if goods and produce fail to meet European standards.

Food will not be our only concern. We import 45% of our energy, and 90% of our clothing. We import technology such as phones, games consoles, and televisions; we import cars; we import furniture, and building materials; we import pharmaceuticals; we import fuel. Every part of the economy will be affected by the falling Pound (although there is one benefit: boosting exports). While this damage has already been done, we can still stop further damage from tariffs by embracing the single market and all it represents.