Food crisis: Experts warn that Brexit price hike won’t be resolved quickly

Figures published last week show the price of food items rose by 2.7% in January, the highest rate in nine years.

A surge in global food prices is being reflected in shopping baskets – sugar prices were up by 33% year-on-year in December, cereals increased by 20%, while meat and dairy rose by 17%.

But retailers say while some of this is short-term due to, for example, the impact of the pandemic, there are concerns there will be sustained food inflation without “radical action”.

Ewan MacDonald-Russell, head of policy at the Scottish Retail Consortium, said one of the issues was labour shortages in areas such as HGV drivers, distribution and farming.

“The consequence of labour shortages is that businesses have to pay more money in order to attract people to work there,” he said.

“I am not making a comment on whether that is a good or bad thing – if you have to pay more for your workers in the food supply chain that is going to get pushed up the supply chain.

“We have labour shortages for various reasons – part of that is because of Covid and lots of people who might have been migrant workers have gone home.

“But part of it is that is harder now for businesses to access lots of workers now from the European Union and that was beneficial in the food supply chain.

“So that is a specifically UK dimension to something that is a wider issue,” he added.

MacDonald-Russell said the energy crisis was also pushing up the cost of production, as well as making it more expensive to heat shops.

“Of course it also hurts our customers and if our customers don’t have as much money for anything else because they are having to keep their homes warm, that is having a depressing effect on sales,” he added.

“That doesn’t affect food sales so much as people need a certain amount of food, but it does mean people tend to change what they are buying.

“That tends to impact a little bit on retailers as more premium products tend to be a bit more high margin – so you are being a bit squeezed on that and that reduces your ability to absorb costs. “

MacDonald-Russell said retailers also had faced extra costs from the pandemic, such as perspex screens, extra staff hours, hand sanitiser and face masks which were being passed onto the consumer.

“We estimated Scottish retailers as a whole have spent well over £50 million – that is just in Scotland – on [Covid] mitigations,” he said.

He highlighted looming tax costs, such as the rise in National Insurance, which are likely to have an impact.

And he warned while new post-Brexit controls on imports to the UK which came into force in January have not yet had a huge impact, this is likely to change.

“At the moment it is paperwork checks but they are not doing the physical checks,” MacDonald-Russell said.

“We’re probably not seeing that causing huge disruption yet, but come the summer we are going to have physical checks on all the items coming in. We would certainly say those checks coming in are likely to be onerous – ultimately the longer a lorry is taking to travel on its journey, that is just increasing the cost, whether that is drivers, fuel, everything else to move on.

“I think it is something that is manageable, but it is potentially pretty significant both cost and disruption.”

He added: “It is very hard to see how this gets resolved quickly. ­Hopefully long term for example ­energy prices will settle or if we see inflation ­generally get a bit more ­under control.

“But there is just that combination of the big macro-economic factors and the direction of travel from government.”

In 2020, the British Medical Journal published a paper from health experts which concluded the number of households experiencing food insecurity and its severity is likely to increase because of “expected sizeable increases in median food prices” after Brexit.

Co-author Dr Martine Barons, director of the applied statistics and risk unit at Warwick University, said: “We tried to look at becoming a third country, what effect is that going to have on our supply chains, what effect is that going to have on labour shortages, what kind of effect is that going to have on the paperwork – all of this we have seen and this is before any of this was being talked about.

“The multiple subtle ways in which that Brexit was going to undo things which had been really embedded into our society and way of doing things.”

She said any assessment on how much Brexit has influenced the current food price rises was likely to be countered with arguments about it being a temporary impact from the pandemic.

But she said: “I think we will look back and see that it has had the majority of the change in the food prices, maybe not on downward pressure on incomes. It is a combination of those two things which is causing food poverty.”

She added: “The idea is we are in it together but we are really not – the impact on some people is much worse than on others. The worst-off are still being kicked.”