Thursday 29 June 2017

How Brexit could add 10c to the price of a loaf of bread

The UK’s decision to leave the EU could put an extra 10c on the price of a loaf in Ireland. (Stock photo)
The UK’s decision to leave the EU could put an extra 10c on the price of a loaf in Ireland. (Stock photo)
Donal O'Donovan

Donal O'Donovan

It is going to take more dough to buy your bread thanks to Brexit.

The UK's decision to leave the EU could put an extra 10c on the price of a loaf in Ireland, the milling industry has warned.

It says it would lead to job losses in the UK because Irish producers would quickly look to source flour inside the European Union.

Eighty per cent of the flour used in the Republic for baked goods and other products currently comes from the UK.

It could soon be hit with an inflation-busting tariff of as much as 40pc if Brexit negotiations fail to produce a free trade deal.

Without a deal, trade between the UK and the rest of the European Union would be governed by World Trade Organisation standards after Brexit, which allows huge financial barriers to imports of agricultural products.

The big risk to Ireland is that beef, dairy and other food produced here would be priced out of the traditional UK market.

However, Ireland is also a major market for UK food.

"If tariffs were to be introduced, the rate the EU normally charges those at would add eight to 10 cents to a loaf of bread in the Republic," the director of the National Association of British and Irish Millers, Alex Waugh, said.

"It is pretty inflationary, assuming the flour continues to come from the same source as now.

"Once you introduce a tariff everything changes, so the likelihood is that the flour currently coming from the UK would come from somewhere else in the EU where there would not be a tariff."

Over the past 20 years, the UK has become the main supplier of milled flour to the Republic. Half of the flour used by Irish bakers was milled on the island of Ireland, a significant proportion of that from Belfast, and the rest came from England, Mr Waugh said.

The only industrial scale flour mill now operating in the Republic is at Portarlington, Co Laois.

However, if Brexit resulted in radically higher flour prices, Irish bakers and other food producers would quickly switch to alternative suppliers inside the EU to avoid those trade barriers.

In many cases that would mean importing wheat or flour from the same countries of origin used today, without it passing through the UK.

Figures for 2015 show that France was the biggest cereal producer in the EU, accounted for more than one-fifth (22.9pc) of the total, followed by Germany (15.4pc) and Poland (8.8pc).

The UK was the next largest cereal producer, accounting for 7.8pc of the EU total. Romania, Italy and Spain are also large grain producers.

Most Irish cereal production is of barley, which is used for malting and brewing.

Irish producers would still be hit, however, because much of the flour sold here is re-exported back to the UK as part of finished goods.

The same trade barriers that could make the cost of British flour prohibitive in Ireland would harm the sale of finished Irish food products and drink in the UK.

Irish Independent

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