Why cheese, fish and flowers could all soon cost more because of new Brexit rules
New Brexit border controls will leave British consumers and businesses facing more than £500m in increased costs and possible delays – as well as shortages of food and fresh flowers imported from the European Union.
The new rules are intended to protect biosecurity by imposing controls on plant and animal products considered a “medium” risk. These include five categories of cut flowers, cheese and other dairy produce, chilled and frozen meat, and fish.
From 31 January, each shipment will have to be accompanied by a health certificate, provided by a local vet in the case of animal produce, and, from 30 April, shipments will be subject to physical checks at the British border.
The government’s modelling says the new controls will cost industry £330m, while the grocery industry has warned that £200m could be added to fresh fruit and vegetable prices should checks be introduced in the future.
There is also the prospect of delays caused by inspections of faulty paperwork, which could derail supply chains that rely entirely on fast turnaround of goods.
British importers have told Sky News that the new rules, which have already been delayed five times in three years, will add up to 17% to shipping costs, leading to higher prices for consumers.
European companies and industry groups say the controls are unnecessary as they replicate checks already made in the EU, and that Brexit is adding bureaucracy and cost to dealing with the UK.
The new import controls are a consequence of Britain having left both the single market and the customs union when the trade and co-operation deal with the EU came into force in January 2021.
While UK exporters to Europe were immediately subject to customs rules, the British government waived import controls to avoid damaging the economy and food supply.
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On five occasions since 2021 ministers planned and then cancelled their introduction, in part because of fears that interrupting food supplies from the EU would exacerbate the cost of living crisis.
Almost 80% of UK vegetable imports and 40% of fruit comes from Europe.
In the Netherlands, the horticulture industry has called for a further delay to controls that will impact its £1bn-a-year trade with the UK, the second largest in Europe behind Germany, which accounts for around 90% of our cut flower and plant imports.
‘We’re going back in time’
Dutch flower wholesaler Heemskerk has been exporting to the UK since before it joined the common market.
The UK now requires that five types of flowers, including orchids and carnations, be checked in factories by a local inspector for two species of leaf mites that destroy foliage.
Managing director Nick van Bommel points out that the checks replicate the same processes made at the Dutch border if the plants are imported to Europe, and by his staff for trade within the EU.
Managing director of Dutch flower wholesaler Heemskerk Nick van Bommel
“We’re going back in time. They want to have health inspections that we haven’t carried out for more than thirty years, and now from next week on we start again,” he said.
“It won’t help anybody, but it will make an awful lot of costs and somebody has to pay the bill at the end. I’m 100% sure that the last customer, the British consumer, has to pay for this.”
The Dutch association of floriculture wholesalers has asked the British government to delay the changes by another year.
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Its spokesperson Tim Rozendaal told Sky News: “If Brexit was about cutting down Brussels’s red tape and bringing down costs, I don’t see the point.
“Anything that our industry has been facing since Brexit is longer red tape, additional costs and bureaucracy.”
At New Covent Garden Market in London, which receives shipments from the Netherlands within hours of flowers being cut, wholesalers are equally sceptical.
Freddie Heathcote, owner of Green & Bloom, calculates his shipping costs will rise by up to 17% – and the knock-on to consumers could be increases of 20% to 50% once the physical inspection regime is in place.
Freddie Heathcote, owner of Green & Bloom
“We have been told the charge for consignments crossing at Dover or Folkestone will be £20 to £43 per category item listed on the consignment.
“We imported 28 different consignment lines tonight from one supplier, which would be £560 to £1,204 to clear the border control point on a total invoice of £7,000. That’s between 8% and 17% additional cost on an average import for us.”
The food industry is concerned too.
Patricia Michelson, founder of London cheese chain La Fromagerie, has been importing artisan cheese from across Europe for more than 40 years. She is concerned that the cost and hassle of sourcing veterinary checks in Europe will dissuade some suppliers.
Patricia Michelson, founder of London cheese chain La Fromagerie
“We deal with suppliers who are one or two guys in a dairy with 50 or 100 sheep or 20 cows. Do they want to be paying for this new certificate to send to us?
“I assure you that most of them will say no. So the onus is on us… that means another extra cost, on top of all the costs so far to bring the produce in.”
La Fromagerie
‘Disturbing confusion’
After months of preparation this week the Department of Environment, Food and Rural Affairs added a host of common fruit and vegetables to the list of medium risk produce.
It initially said the produce would only face physical checks from October, but 48 hours later changed the rules again, saying they would give three months notice when health declarations and physical checks are required.
The late change attracted criticism from leading trade body the Institute of Export and International Trade.
“The confusion caused by the announcement… is disturbing, particularly at a point when significant changes are being planned for the general operation of the UK border,” said its general secretary Marco Forgione.
A government spokesman said: “We are committed to delivering the most advanced border in the world. The Border Target Operating Model is key to delivering this, protecting the UK’s biosecurity from potentially harmful pests and diseases and maintaining trust in our exports.
“We are taking a phased approach – including initially not requiring pre-notification and inspections for EU medium risk fruit and vegetables and other medium risk goods – to support businesses and ensure the efficient trade is maintained between the EU and Great Britain.”
The UK’s benchmark stock index has reached another record high.
The FTSE 100 index of most valuable companies on the London Stock Exchange closed at 8,505.69, breaking the record set last May.
It had already broken its intraday high at 8532.58 on Friday afternoon, meaning it reached a high not seen before during trading hours.
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The weakened pound has boosted many of the 100 companies forming the top-flight index.
Why is this happening?
Most are not based in the UK, so a less valuable pound means their sterling-priced shares are cheaper to buy for people using other currencies, typically US dollars.
This makes the shares better value, prompting more to be bought. This greater demand has brought up the prices and the FTSE 100.
The pound has been hovering below $1.22 for much of Friday. It’s steadily fallen from being worth $1.34 in late September.
Also spurring the new record are market expectations for more interest rate cuts in 2025, something which would make borrowing cheaper and likely kickstart spending.
What is the FTSE 100?
The index is made up of many mining and international oil and gas companies, as well as household name UK banks and supermarkets.
Familiar to a UK audience are lenders such as Barclays, Natwest, HSBC and Lloyds and supermarket chains Tesco, Marks & Spencer and Sainsbury’s.
Other well-known names include Rolls-Royce, Unilever, easyJet, BT Group and Next.
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FTSE stands for Financial Times Stock Exchange.
If a company’s share price drops significantly it can slip outside of the FTSE 100 and into the larger and more UK-based FTSE 250 index.
The inverse works for the FTSE 250 companies, the 101st to 250th most valuable firms on the London Stock Exchange. If their share price rises significantly they could move into the FTSE 100.
A good close for markets
It’s a good end of the week for markets, entirely reversing the rise in borrowing costs that plagued Chancellor Rachel Reeves for the past ten days.
Fears of long-lasting high borrowing costs drove speculation she would have to cut spending to meet self-imposed fiscal rules to balance the budget and bring down debt by 2030.
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They Treasury tries to calm market nerves late last week
Long-term government borrowing had reached a high not seen since 1998 while the benchmark 10-year cost of government borrowing, as measured by 10-year gilt yields, was at levels last seen around the 2008 financial crisis.
The gilt yield is effectively the interest rate investors demand to lend money to the UK government.
Only the pound has yet to recover the losses incurred during the market turbulence. Without that dropped price, however, the FTSE 100 record may not have happened.
Also acting to reduce sterling value is the chance of more interest rates. Currencies tend to weaken when interest rates are cut.
The International Monetary Fund (IMF) has warned against the prospects of a renewed US-led trade war, just days before Donald Trump prepares to begin his second term in the White House.
The world’s lender of last resort used the latest update to its World Economic Outlook (WEO) to lay out a series of consequences for the global outlook in the event Mr Trump carries out his threat to impose tariffs on all imports into the United States.
Canada, Mexico, and China have been singled out for steeper tariffs that could be announced within hours of Monday’s inauguration.
Mr Trump has been clear he plans to pick up where he left off in 2021 by taxing goods coming into the country, making them more expensive, in a bid to protect US industry and jobs.
He has denied reports that a plan for universal tariffs is set to be watered down, with bond markets recently reflecting higher domestic inflation risks this year as a result.
While not calling out Mr Trump explicitly, the key passage in the IMF’s report nevertheless cautioned: “An intensification of protectionist policies… in the form of a new wave of tariffs, could exacerbate trade tensions, lower investment, reduce market efficiency, distort trade flows, and again disrupt supply chains.
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“Growth could suffer in both the near and medium term, but at varying degrees across economies.”
In Europe, the EU has reason to be particularly worried about the prospect of tariffs, as the bulk of its trade with the US is in goods.
The majority of the UK’s exports are in services rather than physical products.
The IMF’s report also suggested that the US would likely suffer the least in the event that a new wave of tariffs was enacted due to underlying strengths in the world’s largest economy.
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The WEO contained a small upgrade to the UK growth forecast for 2025.
It saw output growth of 1.6% this year – an increase on the 1.5% figure it predicted in October.
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Economists see public sector investment by the Labour government providing a boost to growth but a more uncertain path for contributions from the private sector given the budget’s £25bn tax raid on businesses.
Business lobby groups have widely warned of a hit to investment, pay and jobs from April as a result, while major employers, such as retailers, have been most explicit on raising prices to recover some of the hit.
Chancellor Rachel Reeves said of the IMF’s update: “The UK is forecast to be the fastest growing major European economy over the next two years and the only G7 economy, apart from the US, to have its growth forecast upgraded for this year.
“I will go further and faster in my mission for growth through intelligent investment and relentless reform, and deliver on our promise to improve living standards in every part of the UK through the Plan for Change.”
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Run of bad economic data brings end to market turbulence and interest rate benefits as three Bank cuts expected for 2025
A week of news showing the UK economy is slowing has ironically yielded a positive for mortgage holders and the broader economy itself – borrowing is now expected to become cheaper faster this year.
Traders are now pricing in three interest rate cuts in 2025, according to data from the London Stock Exchange Group.
Earlier this week just two cuts were anticipated. But this changed with the release of new official statistics on contracting retail sales in the crucial Christmas trading month of December.
It firmed up the picture of a slowing economy as shrunken retail sales raise the risk of a small GDP fall during the quarter.
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That would mean six months of no economic growth in the second half of 2024, a period that coincides with the tenure of the Labour government, despite its number one priority being economic growth.
Clearer signs of a slackening economy mean an expectation the Bank of England will bring the borrowing cost down by reducing interest rates by 0.25 percentage points at three of their eight meetings in 2025.
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If expectations prove correct by the end of the year the interest rate will be 4%, down from the current 4.75%. Those cuts are forecast to come at the June and September meetings of the Bank’s interest rate-setting Monetary Policy Committee (MPC).
The benefits, however, will not take a year to kick in. Interest rate expectations can filter down to mortgage products on offer.
Despite the Bank of England bringing down the interest rate in November to below 5% the typical mortgage rate on offer for a two-year deal has been around 5.5% since December while the five-year hovered at about 5.3%, according to financial information company Moneyfacts.
The market has come more in line with statements from one of the Bank’s rate-setting MPC members. Professor Alan Taylor on Wednesday made the case for four cuts in 2025.
His comments came after news of lower-than-expected inflation but before GDP data – the standard measure of an economy’s value and everything it produces – came in below forecasts after two months of contraction.
News of more cuts has boosted markets.
The cost of government borrowing came down, ending a bad run for Chancellor Rachel Reeves and the government.
State borrowing costs had risen to decade-long highs putting their handling of the economy under the microscope.
The prospect of more interest rate cuts also contributed to the benchmark UK stock index the FTSE 100 reaching a new intraday high, meaning a level never before seen during trading hours. A depressed pound below $1.22, also contributed to this rise.
Similarly, falling US government borrowing has reduced UK borrowing costs after US inflation figures came in as anticipated.
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