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.”
Global financial markets have been on a rollercoaster ride over the past few days, but now, with President Donald Trump having paused his “retaliatory” tariffs, the situation should stabilise.
Here, we outline how the pound in your pocket has been affected.
Stock markets, bonds and currencies moved sharply after Mr Trump put a 90-day pause on tariffs other than the base 10% tax slapped on almost all imports to the US. China still faces a levy of 125% on the goods it exports to the US.
But there have still been some impactful changes since his so-called “liberation day” tariff announcement last week.
So, what’s happened?
Well, last week two more interest rate cuts were expected by the end of this year, but now traders are pricing in three cuts by the Bank of England.
Borrowing will become cheaper as the interest rate is now anticipated to be brought down more than previously thought, to 3.75% by the end of 2025 from the current 4.5%.
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It’s not exactly for a good reason, though. The trade war means the UK economy is forecast to grow less.
This lower growth is what’s making observers think the Bank will cut rates sooner – making borrowing cheaper can lead to more spending. Increased spending can stimulate economic growth.
What does this all mean for you?
Some debts, like credit card bills, will become a bit cheaper.
Mortgages
Crucially for anyone soon to re-fix their rate, this means mortgage costs are falling.
Already, the typical two and five-year fixed rate deals are coming down, according to data from financial information company Moneyfacts.
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After weeks where the average rate would fall only once or twice, there have been larger and daily falls, the data shows.
As of Thursday, the typical rate for a five-year deal is 5.14%, and 5.29% for the average two-year fixed mortgage.
If the interest rate expectations remain, by the end of the year, the average two-year fixed mortgage rate will fall to 4.3% if a person is borrowing 75% of the property’s value, according to analysts at Pantheon Macroeconomics.
Filling up your car
Another positive that’s motivated by a negative is the reduced fuel cost to the motorist of filling up their vehicle.
The oil price fell due to rising fears of a recession in the world’s biggest economy. Now that those concerns have somewhat subsided, the oil price has remained comparatively low at $63.75 for a barrel of the benchmark Brent crude.
It’s far below the average price of $80 from last year.
This lower cost is likely to filter down to cheaper prices at the pump within days as the sharp oil price drops hit at the end of last week.
Lower oil costs could help bring down costs overall, lowering inflation, as oil is still used in many parts of the supply chain.
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Savings
Lower interest rates mean falling savings rates, so savers can expect to get less of a return in the coming months.
Anyone with a stocks and shares ISA (Individual Savings Account) is likely to get a shock when they see the decline in their returns.
A display shows the sharp rise of the Nikkei stock index in Tokyo. Pic: AP
Holidays
It’s not the best time to be heading off on a trip to a country that uses the euro. The pound hasn’t strayed far from buying €1.16, a low last seen in August.
It means your pound doesn’t go as far, as you’re getting less euro.
Against the dollar, however, sterling has risen to $1.29.
The exchange rate had been higher in the immediate wake of Mr Trump’s tariff announcement as the dollar value sank. At that point, you could briefly have bought $1.32 for a pound.
Supermarket shopping
Helpfully, the UK’s biggest and most popular UK supermarket, Tesco, updated us that it expects tariffs will have a “relatively small impact”.
Business
Donald Trump has finally blinked – but it’s not the stock markets that have forced him to act
Chalk this one up to the bond vigilantes.
This is the term used periodically to describe investors who push back against what are perceived to be irresponsible fiscal or monetary policies by selling government bonds, in the process pushing up yields, or implied borrowing costs.
Most of the focus on markets in the wake of Donald Trump’s imposition of tariffs on the rest of the world has, in the last week, been about the calamitous stock market reaction.
This was previously something that was assumed to have been taken seriously by Mr Trump.
During his first term in the White House, the president took the strength of US equities – in particular the S&P 500 – as being a barometer of the success, or otherwise, of his administration.
Donald Trump in the Oval Office today. Pic: Reuters
He had, over the last week, brushed off the sour equity market reaction to his tariffs as being akin to “medicine” that had to be taken to rectify what he perceived as harmful trade imbalances around the world.
But, as ever, it is the bond markets that have forced Mr Trump to blink – and, make no mistake, blink is what he has done.
To begin with, following the imposition of his tariffs – which were justified by some cockamamie mathematics and a spurious equation complete with Greek characters – bond prices rose as equities sold off.
That was not unusual: big sell-offs in equities, such as those seen in 1987 and in 2008, tend to be accompanied by rallies in bonds.
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However, this week has seen something altogether different, with equities continuing to crater and US government bonds following suit.
At the beginning of the week yields on 10-year US Treasury bonds, traditionally seen as the safest of safe haven investments, were at 4.00%.
By early yesterday, they had risen to 4.51%, a huge jump by the standards of most investors. This is important.
The 10-year yield helps determine the interest rate on a whole clutch of financial products important to ordinary Americans, including mortgages, car loans and credit card borrowing.
By pushing up the yield on such a security, the bond investors were doing their stuff. It is not over-egging things to say that this was something akin to what Liz Truss and Kwasi Kwarteng experienced when the latter unveiled his mini-budget in October 2022.
And, as with the aftermath to that event, the violent reaction in bonds was caused by forced selling.
Now part of the selling appears to have been down to investors concluding, probably rightly, that Mr Trump’s tariffs would inject a big dose of inflation into the US economy – and inflation is the enemy of all bond investors.
Part of it appears to be due to the fact the US Treasury had on Tuesday suffered the weakest demand in nearly 18 months for $58bn worth of three-year bonds that it was trying to sell.
But in this particular case, the selling appears to have been primarily due to investors, chiefly hedge funds, unwinding what are known as ‘basis trades’ – in simple terms a strategy used to profit from the difference between a bond priced at, say, $100 and a futures contract for that same bond priced at, say, $105.
In ordinary circumstances, a hedge fund might buy the bond at $100 and sell the futures contract at $105 and make a profit when the two prices converge, in what is normally a relatively risk-free trade.
So risk-free, in fact, that hedge funds will ‘leverage’ – or borrow heavily – themselves to maximise potential returns.
The sudden and violent fall in US Treasuries this week reflected the fact that hedge funds were having to close those trades by selling Treasuries.
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Confronted by a potential hike in borrowing costs for millions of American homeowners, consumers and businesses, the White House has decided to rein back its tariffs, rightly so.
It was immediately rewarded by a spectacular rally in equity markets – the Nasdaq enjoyed its second-best-ever day, and its best since 2001, while the S&P 500 enjoyed its third-best session since World War Two – and by a rally in US Treasuries.
The influential Wall Street investment bank Goldman Sachs immediately trimmed its forecast of the probability of a US recession this year from 65% to 45%.
Of course, Mr Trump will not admit he has blinked, claiming last night some investors had got “a little bit yippy, a little bit afraid”.
And it is perfectly possible that markets face more volatile days ahead: the spectre of Mr Trump’s tariffs being reinstated 90 days from now still looms and a full-blown trade war between the US and China is now raging.
But Mr Trump has blinked. The bond vigilantes have brought him to heel. This president, who by his aggressive use of emergency executive powers had appeared to be more powerful than any of his predecessors, will never seem quite so powerful again.
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