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Brexit 'will spare shoppers from £7.5bn a year food bill threat'

Published 18/10/2016

Claims that Brexit will push up food prices are being challenged by the report from the Institute of Economic Affairs
Claims that Brexit will push up food prices are being challenged by the report from the Institute of Economic Affairs

Brexit will help shield shoppers from food price rises linked to "costly" EU regulations, a UK think tank has claimed.

A new paper published by the Institute of Economic Affairs (IEA) says that the UK would have been hit with additional compliance costs worth up to £7.5 billion a year if the country were to stay part of the EU.

Compliance with existing agricultural regulations - such as the Common Agricultural Policy which provides subsidies to EU farmers - are already costing England at least £600 million a year, the think tank said.

If a review of existing legislation led to an EU-wide ban on pesticides, the UK food chain could see lower yields, higher prices and be hit with additional raw material costs of about £7.5 billion a year that could be passed on to shoppers, the paper explained.

Mark Littlewood, the director general of the Institute of Economic Affairs, said: "EU member states face staggering food price rises unless the march of increased regulation is halted. The UK is fortunate that it now has the opportunity to repatriate control of its farming regulations.

"It's crucial that decisions stem from good scientific evidence, and pay attention to consumers' interests and the potential crippling costs that overregulation can have in pushing up food prices and the cost of living."

The IEA's research counters recent reports claiming food prices would rise directly as a result of Brexit.

Former deputy prime minister Nick Clegg warned earlier this week that grocery shoppers would have to bear the knock-on costs of "whopping" tariffs on imported foods if the UK left the European single market, with a 59% levy on beef, 38% on chocolate, 40% on New Zealand lamb and 14% on Chilean wine.

Those costs would be compounded by the effects of a weaker pound pushing up import costs.

Sterling has dropped more than 18% since the EU referendum.

According to Treasury estimates, a 12% devaluation of sterling alone risks adding £123 to the average family's shopping bill.

Speaking in London, Mr Clegg said the row, which led to products such as Marmite and PG Tips briefly withdrawn from supermarket shelves last week, was "a foretaste of what is to come in the next 12 months".

Tesco momentarily grappled with a shortage of store cupboard staples - including Marmite, Pot Noodle and Persil - after reportedly refusing to bow to Unilever's demands for a 10% wholesale price rise to offset a drop in sterling.

Unilever later confirmed that the supply situation with Tesco was "successfully resolved".

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