Propel Morning Briefing

Major rises in cost of food and drink predicted following Brexit

Procurement and supply chain consultancy Prestige Purchasing has predicted major rises in the cost of food and drink as a result of the UK’s decision to leave the EU.

Chief executive David Read said some effects, such as import tariffs and rising labour costs, would only have an impact on prices once the UK actually left the EU, but he added that if recent significant falls in the value of sterling continued, we would “see prices increasing by the end of the summer”.

He added: “As a nation we run a £21bn trade gap in food, as we produce only about 60% of what we eat. Almost 70% of our imported food is from the EU, but sterling has fallen against the dollar and many other currencies, so all of our food and drink imports will be affected.”

After spectacular falls in the value of the pound in the immediate aftermath of the referendum result, sterling rallied late the following day to $1.37. As foreign exchange markets enter a second week of trading, there is strong speculation a fall to about $1.20 is possible in the coming weeks.

Read said: “A currency fall of about 20% was predicted before the referendum, and is now looking increasingly possible. If this position occurs for the mid-term, and the mix of imported products does not change, the price of a caterer’s basket of goods will rise by as much as 8%. Most caterers run sub-optimal supply chains. There has seldom been a better time to review the range of products purchased and take positive action to ensure supply chains are at maximum efficiency.”

 

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