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Almost £1,000 a year would be added to household spending under a hard Brexit, one report found. Photograph: Chris Howes/Wild Places Photogra/Alamy
Almost £1,000 a year would be added to household spending under a hard Brexit, one report found. Photograph: Chris Howes/Wild Places Photogra/Alamy

Brexit to have greatest negative impact on regions outside London

This article is more than 5 years old

Price rises will disproportionately affect people in Northern Ireland, Wales, the Midlands and the north-east, reports say

Brexit will make people outside London worse off, two reports have found.

Household bills will rise by between £245 and £961 a year after Brexit, with a disproportionately adverse impact on lower-income groups and people in Northern Ireland, Wales, the Midlands and the north-east, they say.

The Institute for Public Policy Research found a hard Brexit would hit those out of London the most because household spending patterns involved more goods and services that will be hit by price rises.

“Our findings suggest that post-Brexit price rises will squeeze incomes more in parts of the UK outside London,” said Marley Morris, IPPR senior research fellow.

Wales and the north-east were most at risk because of their disproportionate reliance on producing goods and food for export to the EU including Welsh lamb, Airbus wings, and cars.

Flintshire, Wrexham, Sunderland, Telford, Wrekin, south Derbyshire, the home of Rolls-Royce, west Derbyshire and Luton were also identified as potential losers. “All income groups, including the poorest, will face negative impacts,” said the IPPR.

A second report by consultancy Oliver Wyman reached similar conclusions. It modelled post-Brexit costs on a basket of 150 imports and found that prices would rise for all consumers regardless of income or where they lived.

But in poorer areas the impact of increased costs in goods that attract higher tariffs such as meat and dairy products would be greatest because a greater proportion of household income would go on weekly shopping bills and transport, for example.

It calculated that almost £1,000 a year would be added to household spending under the worst-case scenario of a hard Brexit, which it said would cause significant red tape and have World Trade Organization tariffs and increased labour costs.

It assessed the supply chain costs for all 150 goods, analysing everything from tariffs to non-tariff barriers such as transport, rules of origin certificates, pre-shipment inspections, delays and administration. It also looked at the cost of labour in each region.

The price of a restaurant meal would go up because of increased cost of imported food and labour because of trade and non-trade barriers in every Brexit scenario, it said.

While some items may be cheaper on paper such as Argentinian beef or New Zealand butter, the overall impact on the cost of the weekly shopping would be marginal.

A soft Brexit would cost households an extra £245 a year, a typical meal for four would go up by £9 and the cost of a price of trainers would rise by about £7.

Oliver Wyman concluded Northern Ireland, which has the poorest economy of the 12 regions of the UK, would be hit worst by increased costs.

Reaching the same conclusion as the IPPR, Oliver Wyman found that the savings in importing goods from non-EU countries did not outweigh the increased costs of EU imports under every Brexit scenario.

“Even if we had free-trade deals with every single country outside the EU and went to no tariffs, there is no way things will be cheaper. It is still a negative situation for everybody,” said Duncan Brewer, partner at Oliver Wyman and head of its retail and consumer team.

The projected price reductions in an EU-US and EU-Japan trade agreement are just 0.4% and 0.2%, according to the IPPR report. Reductions in tariffs for imports for non-EU countries would be unlikely to fully compensate for price rises in goods, particularly food and drink, the IPPR said in its report, “An equal exit, the distributional consequences of leaving the EU”.

It found the post-Brexit picture was complex but that if certain households spent a greater share of their income on goods expected to cost more because of trade barriers, they were more likely to be exposed to price changes.

“Given that the EU will continue to negotiate trade deals with third countries, it is hard to see how the UK could significantly outpace the EU in negotiating agreements that lower consumer prices,” it said.

The Oliver Wyman report illustrated the point with the cost of Irish beef, commonly sold in supermarkets. It wholesales at about £3.70 a kilogram. Argentinian beef, which is currently £5.50 per kilo because of EU protectionist tariffs, would come down to £3.50 a kilo after Brexit. At the same time, Irish beef would go up to £3.90 per kilo if tariffs were imposed.

But as Brewer pointed out, such a free trade agreement on Argentinian beef would only result in a 20p per kilo saving on beef – not enough to compensate for the higher cost of imports of other goods such as dairy, cars parts or electronics from the EU.

A third report published on Wednesday by local councils found that Brexit was creating a “perfect storm” for rural communities, with unaffordable homes, poor connectivity, skills gaps and health inequalities threatening the future success and prosperity of those areas.

“If Britain is to make the most of a successful future outside of the European Union, it’s essential that our future success is not confined to our cities,” said Mark Hawthorne, chairman of the Local Government Association’s people and places board.

A majority of business leaders want post-Brexit customs arrangements that avoid the need for new customs processes with the EU, even if they take longer to put in place, a survey of 800 business leaders by the Institute of Directors found.

Avoiding customs-related disruptions was IoD members’ number-one priority for the UK’s negotiations on its future economic relationship with the EU. Continued regulatory alignment was another clear priority.

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