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Wednesday, December 27, 2017

Prices to rise after Brexit

The British Retail Consortium has warned that consumers face rising prices after Brexit unless Britain can replicate trade deals negotiated by the EU with dozens of other countries. The Guardian says that the BRC’s chief executive, Helen Dickinson, has predicted the cost of everyday products from food to clothing will go up if the UK loses the preferential arrangements it enjoys as a member of the EU:

Currently, she said, Britain benefits from zero or low tariffs on various imports from trade deals struck by the EU with 73 third-party countries.

As it stands, those arrangements will come to an end the moment Britain leaves the EU.

“On 29 March 2019 we fall out of all of those agreements. On that minute after we leave, those arrangements cease to apply to the UK.

“So what is important between now and 2019 is that the UK gets on with the job in hand in terms of focusing on at least replicating existing arrangements just to get us back to where we are at the moment.

“We are talking here about everyday products that people buy week in, week out. Fish from Norway, wine from South Africa, clothes from Turkey – each of those have lower tariff rates on them than would exist if we didn’t have those deals in place.”

The BRC said the tariff on clothing from Turkey, a major supplier to the UK, could rise from zero to 12%, and duties on fish from Iceland could go from 3.4% to 11%.

All of this of course was predicted before the referendum, nor is it easily rectified. Trade deals such as those envisaged by the BRC take time to negotiate. The chances of having any in place by the time we leave the EU are remote. The cost of living is set to rise exponentially.
"The cost of living is set to rise exponentially." Literally that is very worrying; over time that would be worse than rising astronomically.

I think the assessment is on the basis of lack of agreement, but the phase one agreement commits NI to an open border by full alignment with the Single Market and Customs Union, but at the same time the government has promised the DUP that there would be no divergence between NI and GB. I am not sure where this would leave financial services, but supply and sale of goods would be little affected. Nevertheless, without considering the possibility of further slippage of sterling, I think prices would rise as an indirect result of uncertainty and an inability of UK buyers to make long term contracts.

The other issue is political uncertainty, whatever happens, UK politics is set to be dominated by Brexit for years to come and will consume the government's ability to respond effectively. Widespread disagreement and blame within both the Conservatives and Labour will add to the uncertainty.

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