No Deal Brexit could add 1PC to Inflation

The prices of milk, meat and clothes could all soar if Britain fails to strike a free trade deal with the EU, as tariffs at the border would add to costs facing hard-pressed families. A “no deal” Brexit risks adding more than 1pc to inflation because it would leave the UK using World Trade Organization rules and taxes, according to new research. Dairy prices could rise by 8pc, meat almost 6pc, clothing 2.4pc and vehicles 5.5pc. Prices are currently rising faster than wages, harming families’ spending power. That situation is forecast to gradually reverse over the next year. However, trade on WTO rules in the event of failed negotiations with the EU will add extra taxes on imported goods from March 2019 and potentially cause real wages to fall again. The researchers said: “The overall increase in price in the affected goods is estimated to be 2.7pc, increasing the overall cost of living 0.8 to 1.1pc for a typical family, with the unemployed and families, those with children and pensioners hit hardest. This may seem a small number, but in a country in which the real incomes of ordinary families have been stagnant for several years, a loss of this order would have a significant effect on welfare.”