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Martine Barons

April 7th, 2020

Fattier, saltier, more sugary: the true effects of food price inflation

1 comment | 8 shares

Estimated reading time: 10 minutes

Martine Barons

April 7th, 2020

Fattier, saltier, more sugary: the true effects of food price inflation

1 comment | 8 shares

Estimated reading time: 10 minutes

A hard Brexit could push up the family food bill by £50 per week – pushing more families towards a poor quality diet, making it hard to control chronic diseases and worsening mental health problems, writes Martine Barons (University of Warwick).

The UK’s reliance on food imports, including from the EU, is significant – and that is why a hard Brexit is widely forecast to raise food prices. For a high income country, food insecurity in the UK is surprisingly prevalent. Thirteen per cent of people report being worried their food would run out before they got money for more (in the parlance, marginally food secure) and 8% could not afford to eat balanced meals (low food secure) or went hungry (very low food secure). Predictably, among low-income households food insecurity is higher, running at 29 per cent.

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Photo: notcub via a CC-BY-NC-SA 2.0 licence

People on lower incomes buy cheaper foods and eat less. Compared to people on higher incomes, they eat more high fat, salty, sugar-sweetened foods and processed meat and fewer fruit and vegetables. This makes it hard to control diet-sensitive chronic diseases, including hypertension, hyperlipidaemia, and diabetes. Food insecurity is also associated with poor educational attainment, poor mental health and social isolation, which increases the death rate.

Slow earnings growth is forecast for the next four years, so the key to households’ ability to afford a healthy diet lies mainly with changes in food costs. Recently, the UK has enjoyed low food price rises: in November 2018, food price inflation was 0.5 per cent per annum. But how much food prices change in the future depends on the deal that replaces the UK’s EU membership. A hard Brexit would leave the UK trading by WTO rules and would be highly disruptive. A deal which is broadly similar to the UK’s EU membership would be minimally disruptive, and the changes in food prices are consequently smaller.

A great deal of uncertainty exists about the impact of Brexit on food prices: Leave campaigners promised cheaper food (although this may be the result of lower standards, especially in animal welfare) and Remain campaigners warned of price rises. The impact will undoubtedly differ depending on the type of food.

Coffee and tea, for example, while they are imported, are already blends of different kinds of beans and leaves and if costs rise, manufacturers may decide to re-blend using a higher proportion of the less expensive ingredients, thereby keeping prices relatively stable. Similarly, soft drinks manufacturers can reformulate, as they did in response to the sugar tax. But other foodstuffs have less flexibility.

The biggest differences between UK and global prices are in beef and poultry, where the EU’s production standards are higher than the rest of the world. This suggests that constraining price rises for these foods following Brexit might be achieved principally by lowering animal welfare and food hygiene standards, so increasing risks to human health.

Likewise, not all foodstuffs are exclusively used as human food, which will affect their availability. Corn and sugar beet are both used as animal feed, and corn and sugar are both biofuel feedstocks. It is important to recognise these links when forecasting price rises.

So how will families’ food costs change under a minimally disruptive Brexit deal? And what about under a hard Brexit? The Consumer Price Index food element change is most likely an increase of around 6.1 per cent, a twelve-fold increase over recent food price inflation. It could be as low as a small reduction of 2.7 per cent, or it could be a large increase of 16.9 per cent. Under a no-deal scenario, the most likely increase is around 22.5 per cent. It could be as low as an increase of 1.4 per cent or as high as an increase of 51.7 per cent.

If, instead of CPI, we calculate the cost of a healthy diet for a family of four (two adults, two children, one in preschool and one in primary school) a weekly healthy food basket under a deal would range from a reduction of £3.68 to an increase of £18.17, with the most likely a cost increase of around £5.80. Under no deal, this family can expect their food prices change to range from a decrease of £1.07 to an increase of £50.98, with the most likely outcome an increase of £20.98.

If meat prices drop to their lower plausible value, perhaps by cutting animal welfare standards, then the cost of the family healthy food basket under a deal would drop by an average of £1.26. Under no deal the cost would still rise, but by a lower amount of £5.71 on average. If, on the other hand, meat prices rose to their upper plausible value, this family would pay £14.66 more per week for their healthy shop under a deal and £44.84 under no deal.

The people hit hardest by these increased costs would be the most vulnerable. The pressure to move to cheaper, sugary, salty and fatty food alternatives in order to have enough to eat would be enormous. Those who need to manage their diets to control diabetes, heart conditions and so on would face the prospect of worsening health. If, as expected, these food price rises become the ‘new normal’, even fit, healthy people would risk developing chronic disease as a result. This in turn would put pressure on the NHS.

This post represents the views of the author and not those of the Brexit blog, nor LSE.

Dr Martine J Barons is the Director of the Applied Statistics and Risk Unit at the University of Warwick. Her research focus is on evidence-based decision support for policymakers, including quantifying uncertainty.

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About the author

Martine Barons

Dr Martine J Barons is the Director of the Applied Statistics and Risk Unit at the University of Warwick. Her research focus is on evidence-based decision support for policymakers, including quantifying uncertainty.

Posted In: Economics of Brexit | Featured | No deal

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