More than three million families would be hit by price rises of more than £500 a year if Brexit happens without the UK reaching a deal with the EU, a study claims.
The poorest households would feel the biggest impact as they spend a greater proportion of their income on items such as food and essential clothing that would be affected by trade tariffs.
This is according to a joint report by the Resolution Foundation and the UK Trade Policy Observatory, which examines the fallout of a “no deal” Brexit in which the UK imposes the same tariffs on the EU as it does for other World Trade Organisation countries.
Under this scenario, these levies would result in significant price increases – with an 8.1% hike in the cost of dairy products, a 5.8% increase for meat and 5.5% rise for cars.
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The report suggests the average household’s consumption would rise by £260, and that more than three million would see price rises beyond £500 a year.
For the poorest 20% of households, the impact would be one third greater than for the richest 20%, the study finds.
It concludes that walking away from the negotiating table would be the “worst possible outcome”.
The report comes as Theresa May and European Commission President Jean-Claude Juncker agreed that “efforts should accelerate” over Brexit negotiations after talks reached a “very disturbing” deadlock.
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Stephen Clarke, economic analyst at the Resolution Foundation, said: “The Government has said that while it wants a comprehensive trade agreement it is also preparing for a ‘no deal’ scenario when we leave the EU.
“Such an outcome – which could see the UK imposing tariffs on EU imports – would increase the annual shopping bills of millions of households by £500, with poorer families taking the biggest hit.
“While trade may not have been the biggest issue in the referendum it is one that will affect the day-to-day living standards of every family in Britain.
“The government must rightly continue to prioritise a comprehensive new trade agreement with the EU in order to avoid households having to fork out for a ‘no deal’ outcome through higher prices and squeezed households budgets.”
A Department for Exiting the EU spokesman said: “We want a deep and special future partnership with the European Union and we are optimistic about achieving this.
“It’s in everyone’s interests we get a free trade agreement that allows for the most frictionless trade in goods and services.”
Source: Sky News