Are Brexit Fears Driving up Food Costs?

The Brexit debate has recently seen conflicting but passionately expressed views on the effect that Britain leaving the EU would have on food prices.

Are Brexit Fears Driving up Food Costs

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David Cameron has claimed that the average familys food bill would rise by three per cent a year. The chief reason would be a weaker currency, leading to higher costs for imports – and of course Britain imports a great deal of food.

Claim and Counter-Claim

Needless to say, this claim was immediately contested by the Brexit campaigners. They have asserted that the EU runs protectionist policies on food that push up supermarket prices. Leave.EU co-chairman Richard Tice is reported as saying that EU regulation and trade rules add 26 per cent to the food bill for families, and penalise poorer people (because they spend a higher proportion of their income on food). He went on to say that restrictive EU policies also impoverish farmers in developing countries.

In this debate theres always a counter-argument. Sure enough, Clive Black, an analyst with Shore Capital is reported as contradicting Mr. Tice, pointing out that most food commodities are priced in dollars, and the pound is expected to weaken against the dollar if Britain leaves the EU. (Just to get the measure of this debate, Shore Capitals Executive Chairman has written a pro-Brexit article in the Telegraph).

Uncertainty Causing Problems for Producers

Uncertainty is certain, at least until the referendum has taken place. And markets hate uncertainty, usually responding by causing price volatility. Lynx Purchasing is reported in The Caterer as forecasting rises in fresh produce prices caused by both sterlings weakness and the uncertainty about the referendum outcome.

Another area that producers are worried about is the availability of migrant labour for harvesting, packing and catering work if Britain leaves the EU. The industry is heavily dependent on migrant seasonal workers and producers fear that Brexit may result in restrictions on migrants working in Britain. One effect may be that catering companies invest in more and upgraded equipment such as commercial warewashers from 247catering.

Brexit campaigners would say that investment in equipment such as commercial warewashers will lead to an economy with higher productivity as cheap labour is replaced by efficient machines.

Remain campaigners would say that this burden on businesses is unnecessary. We will soon know who has been most persuasive.

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