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Why A Brexit "No Deal" Will Hit Poorest U.K. Households the Hardest

Why A Brexit "No Deal" Will Hit Poorest U.K. Households the Hardest
Fri, 10/27/2017 - by Gabrielle Pickard-Whitehead

After months of unsuccessful negotiations, it looks as though Britain may drop out of the E.U. without any trade deal. The abject Brexit failure will not only leave Britain more red-faced and chaotic than we thought possible, but will also hit the poorest families the hardest.

This is the finding of "Switching Lanes," a joint report produced by the think tank Resolution Foundation and academics at Sussex University, which was published following the recent failed attempt in Brussels to unlock the Brexit stalemate.

The report describes the way leaving the E.U. without any trade deal would likely result in a sharp rise in the price of food and other goods. The increase in essential living items would cost the average British household £260 annually, dealing a particular blow to those financially struggling families whom Prime Minister Theresa May referred to as "just about managing."

The rising cost of foods and basic products would be due to Britain's blundering ahead without any trade deal with Europe and instead having to resort to "Plan B": a reliance on World Trade Organization tariffs placed on E.U.-imported goods. The tariffs, according to the Switching Lanes report, would result in dairy and meat product costs jumping by 45 percent, and the price of clothing and footwear rising 10 percent.

Families with little disposable income, which spend most of their weekly budget paying for essential household goods, would be the greatest affected by a "no deal" outcome. The report revealed significant discrepancies between how the poorest and richest households would be impacted.

For instance, rising costs of everyday products would add 1.1 percent on the cost of living for the poorest 20 percent of households, while the richest 20 percent would face a 0.8 percent rise. Stephen Clarke, economic analyst at the Resolution Foundation, shared his concerns over the no deal outcome.

“While trade may not have been the biggest issue in the referendum it is one that will affect the day-to-day living standards of every family in Britain," he told The Guardian. “The government must rightly continue to prioritize a comprehensive new trade agreement with the E.U. in order to avoid households having to fork out for a ‘no deal’ outcome through higher prices and squeezed household budgets.”

Meanwhile, U.K. farmers have been quick to slam the suggestion that Britain could become a self-sufficient nation that no longer relies on food imports. The suggestion was made by Chris Grayling, the transport secretary, who said on The Andrew Marr Show that the U.K. could simply “grow more food” in order to keep prices down.

Grayling’s comments ignited uproar within the farming community, with the National Farmers Union accusing the transport secretary of “talking tripe.”

Laurence Olins, chair of British Summer Fruits, a U.K. body that promotes British-grown fruit, said of Graylings’ comments: “When I saw that interview, my mouth dropped and I thought this needs to be addressed. I was just horrified. It is just indicative of the un-coordinated way the government is approaching Brexit. Our farmers are unable to find labour this year, never mind post-Brexit."

Prime Minister May has insisted that when it comes to Brexit negotiations, “no deal is better than a bad deal,” while Foreign Secretary Boris Johnson has maintained that failing to strike a deal would be “perfectly okay.” Yet another report by U.K. in a Changing Europe sets out some of the further grim realities that a no deal Brexit would mean for working families, calling it a “political mess, a legal morass and an economic disaster.”

The report outlines the damage a failed deal would create financially, noting that the most immediate impact on Britain would be its falling out of current trade arrangements – resulting in a sudden imposition of hefty tariffs on goods traded between Britain and Europe.

Adding to concerns for those already living on stretched budgets is the news that interest rates appear set to rise in Britain, with inflation hitting 3 percent. Warnings have been issued that following the jump in inflation, interest rates could rise as early as next month.

According to the Office for National Statistics, inflation has been pushed up by the higher prices of food, transport and other "recreational" costs. For families on tight incomes, a rise in interest rates could tip them over the edge, pushing up the cost of debt repayments and mortgages.

Daniel Stone, a plumber in Manchester, is concerned about the effects the rising cost of food and other basic items would have on his family, alongside having to pay more for his mortgage and other debts.

“As the weekly shop in the supermarket gets more expensive, it’s getting more and more of a struggle to pay the bills. Now they’re talking of rising interest rates. I really don’t know how we’re going to afford it, especially with Christmas approaching," Stone told Occupy.com. “Brexit has to be to blame. We’re all being punished for a vote nearly half of us didn’t even want.”

 

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