Bank of England: food prices risk 10% rise in no-deal Brexit

Speaking to MPs on the treasury committee yesterday, Carney assessed the risks several Brexit scenarios would have on the cost of food in the UK.

In extreme cases, food prices would rise by 10%, reflecting a potential drop in the value of the pound (a 1.5% higher food price for each 5% drop), tariffs imposed and increased costs at the border as imports are checked. Carney stressed that these worst-case scenarios were highly unlikely.

“For individual food products that will vary, but what people will do is that, if the price of something goes up, they’ll switch products,” ​Carney added. This, in turn, would drive UK consumers to purchase more homegrown produce and turn away from potentially more expensive imported goods.

Not ready​

Carney also warned that the UK was not ready to trade under World Trade Organisation (WTO) rules if there was to be a no-deal Brexit.

“At this point in time, the ports are not ready for a move to an administered WTO relationship,”​ said Carney.

“To be absolutely clear, our agents – my colleagues – have gone to these ports and had conversations directly with the ports in question. We have talked to the private logistics companies, so we have gathered direct information on this.”​

Carney commented that if Government were to propose tariff-free trade with the EU, it would have to extend this offer to everyone looking to trade with the UK.

Free from discrimination​

However, trading under WTO rules would mean that the UK would be free from discrimination in terms of tariffs set on its exports.

The move, should a ‘no-deal’ Brexit apply, could provide opportunities and protection for UK international trade, according to Edwini Kessie, WTO director of agriculture and commodities.

Meanwhile, the ability of food and drink firms to export food to the Continent has been revealed as environment secretary Michael Gove’s biggest fear​​ should the UK leave the EU without a deal.