Sunday 18 August 2019

Wayne O'Connor: 'It'll be a hard day in the life if a disorderly Brexit occurs'

From cornflakes to bed linen, WTO tariffs could add €1,360 to your weekly household bills, writes Wayne O'Connor

A young Paul McCartney woke up, fell out of bed and dragged a comb across his head in the Beatles’ classic A Day in the Life, but had the song been set in post-hard Brexit Ireland, his famous morning routine would have been very different.
A young Paul McCartney woke up, fell out of bed and dragged a comb across his head in the Beatles’ classic A Day in the Life, but had the song been set in post-hard Brexit Ireland, his famous morning routine would have been very different.
Wayne O'Connor

Wayne O'Connor

A young Paul McCartney woke up, fell out of bed and dragged a comb across his head in the Beatles' classic A Day in the Life, but had the song been set in post-hard Brexit Ireland, his famous morning routine would have been very different.

An analysis of future tariffs and additional charges likely to be imposed on products imported here from the UK makes for grim reading.

When combined with a further study of Irish spending patterns, it shows some of the country's favourite items may eventually become unaffordable for many households without a Brexit deal.

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"Found my way downstairs and drank a cup, and looking up, I noticed I was late..."

Last year we imported €28.39m of tea from Great Britain and Northern Ireland, according to figures from the Central Statistics Office (CSO). A recent Economic and Social Research Institute (ESRI) report shows a worst-case-scenario Brexit means tariffs and associated costs would push the price of tea, coffee and cocoa up by 20pc. This means that as a nation, in the event of a hard Brexit, we are going to have to spend an extra €5.7m on tea imports next year to match our drinking habits.

We imported coffee worth more than €32.5m from the UK in 2018. When the ESRI's estimated World Trade Organisation (WTO) tariffs and other associated costs are applied, such as those caused by delays and checks at ports or points of delivery, our national spend on coffee would increase by at least €6.5m annually after a no-deal Brexit.

If you were the young McCartney, you might consider changing the contents of that cup you grabbed. Maybe you would opt for some juice instead. Brands and varieties that come here via the UK will set us back an extra €13.3m per year after a crash-out Brexit.

Breakfast cereals and bread will face increases of 30pc under predicted tariffs and charges. So our favourite bowl of cornflakes, Weetabix or similar cereals will cost the country an extra €29.6m before we even consider the milk, sugar or fruit you might buy to accompany it.

Maybe you prefer a full-Irish in the morning, and think you will escape the worst Brexit-associated costs by eating local pork sausages and rashers. Well, what about that ketchup you put on it? We spent more than €14.4m bringing ketchup across the Irish Sea last year and €90.5m on other sauces, condiments and seasonings (not including salt and Sergeant Pepper). If we continue to import roughly the same amount of these products post-Brexit it will lead to an additional outlay of €15.8m annually. In total, it is a significant financial outlay every year before even leaving the house in the morning.

That glance McCartney took at a clock before noticing he was late? That will also come with a small cost to us if we replicate his morning routine. Our clock imports would rise by an extra €37,000 next year, working off the same CSO and ESRI data. It is not a significant increase but it shows there is no area where prices won't be hit, and that is before we even consider the impact of fluctuating exchange rates.

"Found my coat and grabbed my hat, made the bus in seconds flat..."

Last week the Government warned that online shoppers who buy from UK websites will have to pay extra taxes and forego existing consumer protections in the event of a no-deal Brexit scenario. The extra charges will also relate to many of our UK-based high-street shops. It is expected these stores will pass additional Brexit costs on to consumers.

"The retail industry by its very nature is a low-margin business," said Retail Ireland director Thomas Burke.

"Grocery retailers probably operate on a margin of around 3pc. If you are looking at a product increasing in price by 20pc or even more in some cases there is no way that a retailer can absorb all of that - so a large proportion, if not all of it, will be passed through to the consumer."

The ESRI study predicted 6pc increases for clothing and accessories, and a 5pc rise in footwear costs.

Importing 2.7 billion tons of petrol and oil from the UK in 2018 cost us €1.62bn.

While the ESRI study does not predict any implied price increase directly linked to Brexit for fuel, this does not account for the potential disruption that Brexit may cause to international fuel markets. It is impossible to say what direct costs Brexit will have on already volatile oil prices, but it is hard to envisage a hard-Brexit scenario that doesn't impact on oil costs. It means travelling on that bus will also be more expensive if additional costs are passed on in ticket prices. It will also be more expensive to buy and import buses, trains and other transport options via the UK, and ultimately someone will have to foot these bills too, when fleets are updated.

If you drive a car, it will also be more expensive to buy and maintain it.

"Made my way upstairs and had a smoke, and somebody spoke and I went into a dream..."

Cigarettes coming here would be hit with an additional 2pc WTO tariff, with alcohol also facing minor increases in the region of 1pc to 4pc.

The same cannot be said for sweets and confectionery though. According to the CSO, we imported €68m of 'sweet confectionery' from Britain last year. The cost of such items is predicted to face tariffs that would add more than €18m to our annual outlay on such treats.

It is the brands that we don't produce here that will take the biggest hits. Your favourite soft drink is likely to cost 23pc more; meat an extra 24pc; and milk, cheese or eggs face 46pc increases. These will all be passed on via the chicken roll you have for lunch, or the cheese you get for a lasagne or a burger.

ESRI research professor Martina Lawless and DCU economist Edgar Morgenroth estimate that average Irish households face annual spending increases of €1,360 in the event of a no-deal Brexit where WTO tariffs and additional charges would apply to goods coming here.

"The UK is a significant source of imports into the Irish economy and there is considerable integration of the retail sectors in both countries," they said in an ESRI report launched earlier this year.

Looking at it and CSO data, it is clear that even going to sleep will be more expensive. Irish people spent more than €33.2m importing bed linen and bedspreads from the UK last year. Such items face an estimated 6pc increase in the event of a hard Brexit.

If the Beatles were to create A Day in the Life today, it's unlikely McCartney would have fallen into that dream.

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