The sunny uplands of cheaper food and clothing in the post-Brexit era have spectacularly failed to materialise, and while Britain’s departure from the European Union isn’t entirely to blame, there’s no hiding the reality that it has ratcheted up the inflationary crunch on UK living standards.
Against that backdrop, the most striking aspect of the annual results earlier this week from Scotland’s Farmfoods was that it managed to increase profits in a period when virtually every other supermarket chain has been forced to sacrifice financial returns. Tesco, Asda, Sainsbury’s and Morrisons have all reported hefty declines in profitability in recent months, while investment to keep a lid on shop prices has also dented profitability at discounters Aldi and Lidl.
The accounts filed at Companies House by Farmfoods shed little light on how the Cumbernauld-headquartered company has negotiated challenges that have hampered so many others, but there is no doubt that all the multiple retailers are pressing their suppliers harder than ever on pricing.
READ MORE: Tesco's profits slump to £1bn amid higher costs in 'tough year'
The knock-on effects of this through the supply chain are significant. In its latest report on mergers and acquisitions in the UK food and beverage sector, corporate finance house Oghma Partners noted a surge in distressed M&A activity during the first four months of this year, with insolvencies in food manufacturing up by 250 per cent.
It was reported in April that meat processor Scotbeef was making more than half of workers at its facility in Wolverhampton redundant after losing a large contract with Aldi, which has vowed to do “whatever it takes” to maintain its discount against rivals. That was followed on Thursday by the news that Scotbeef has sold an abattoir near Stirling and a meat packing facility in Glasgow to ABP Food of Ireland.
No such dismal scenes featured in the picture painted by Jacob Rees-Mogg in 2017 when he boasted that the cost of food and clothing in the UK would come down “significantly” once the UK was fully free of Brussels’ influence. Doubling down on that prediction in 2019, he told the BBC that these necessities would be cheaper “straight away by getting rid of the protectionist anti-trade tariffs that the EU imposes”.
READ MORE: Higher food prices 'baked in' as shoppers seek inflationary relief
The reality has been quite the opposite with food inflation hitting a 45-year high of 19.2% in March, according to the Office for National Statistics. The latest official figure for April remained stubbornly high at 19.1%, in contrast to neighbouring European countries where rates of food inflation eased considerably.
A recent study by the London School of Economics found that UK households have paid £7 billion since Brexit to cover the extra cost of trade barriers on food imports from the EU. Researchers calculated that costs in the UK have rocketed by 25% since 2019, but had post-Brexit trade restrictions not been in place, that figure would have been nearly a third lower at 17%.
And there is still more to come. The UK has yet to impose full border checks on food imports since the EU-UK trade deal took effect in January 2021, but the government announced earlier this month its “firm intention” to phase in controls from the autumn. Proposals include a flat-rate inspection fee of up to £43 on each consignment of food, a charge that would almost certainly be passed on to inflation-weary consumers.
Government leaders have punted the idea of a voluntary price cap on food staples to help contain surging inflation, but any empathy for ordinary consumers rings hollow as the cost of Brexit continues to mount up.
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