Saturday 20 October 2018

Grocery bills could rise by more than €100 a month after hard Brexit warns think-tank

If a hard Brexit were to be finalised by British Prime Minister Theresa May, it could push up the cost of living by between 2pc and 3.1pc in Ireland. Photo: REUTERS/Simon Dawson/Pool
If a hard Brexit were to be finalised by British Prime Minister Theresa May, it could push up the cost of living by between 2pc and 3.1pc in Ireland. Photo: REUTERS/Simon Dawson/Pool
Colm Kelpie

Colm Kelpie

A hard Brexit would increase the cost of living for households here by up to €1,360 a year, a leading economic think-tank has warned.

The Economic and Social Research Institute (ESRI) used a range of scenarios to forecast that the price of bread and cereals could rise by up to 30pc while milk, cheese and eggs could increase by 46pc.

It also warned tariffs could push up the cost of imported goods from the UK sold in Ireland, with poor households hit the hardest.

"As Ireland imports a considerable amount of food products from the UK, a hard Brexit could have an immediate impact on the cost of living," said Martina Lawless, one of the report's authors.

"Unfortunately, we find this impact would likely fall disproportionately on lower-income households."

Looking at the impact of trade restrictions on consumers, ESRI found that if a hard Brexit were to be finalised by British Prime Minister Theresa May it could push up the cost of living by between 2pc and 3.1pc in Ireland.

The UK is a significant source of imports into the Irish economy - with 28pc of Irish goods originating in the UK in 2016. This compares with the UK accounting for 14.6pc of Irish goods exports.

"Irish consumers and Irish firms could therefore face significant price increases in the event of tariffs being applied to these products," the report said.

"Of possibly more concern than the size of this average impact is that these effects are very unevenly distributed across households.

"We show that households with lower income levels consume a higher share of products that would be most affected by increases in tariffs and trade cost and the overall effect is inversely related to the household income decile."

Even goods transported into Ireland, using the so-called land bridge where trucks cross Britain from mainland Europe to get to Ireland while not facing tariffs, would still face higher administrative costs.

"Although no tariffs would be imposed on these imports post-Brexit, as they do not originate in the UK, there is the possibility that increased administration costs, eg to verify that the goods are destined for Ireland and not for the UK domestic market, and associated port delays could have a knock-on effect of increasing the cost of delivering those products to Ireland," the report said.

The study used a number of Brexit scenarios to examine the price increase of a range of imported goods.

It found that if tariffs were introduced and other trade costs also increased following a hard Brexit, the price of bread, cereals and dairy products could rise.

Sugar, jam and chocolate would jump in price by 27pc, while coffee and tea would increase by 20pc.

The ESRI said the estimates do not take into account switching of products or changes in expenditure patterns in response to the cost increases.

"Given the size of the possible increases for some product categories, some change in consumer behaviour away from these products would be likely although we do not model this explicitly. The extent of switching would depend on a number of factors," it added.

Irish Independent

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