Brexit: No deal would cost millions of families £500 a year, warns major study

Theresa May has finished a frenetic round of diplomacy to move stalled Brexit talks forward

Jean-Claude Juncker embraces Theresa May as David Davis looks on (AP)

A no-deal Brexit will leave millions of British households £500 a year worse off, a major new study has found.

The detailed research concludes those who “struggle to get food on the table” will be hit hardest, with new trade tariffs causing the cost of essential goods to rise significantly.

The report was published just hours after Theresa May attended a dinner with European Commission President Jean-Claude Juncker in a bid to push stalled Brexit negotiations forward.

It was part of an intense diplomatic round which also saw her speak with French and Irish leaders on Monday, as the spectre of Britain crashing out of the EU with no deal in place looms over the deadlocked Brexit negotiations.

The report by the Resolution Foundation and the University of Sussex looks at the impact on British families of the UK imposing the same tariffs on EU goods as it does on those from other World Trade Organisation countries, a likely no-deal outcome.

The study concluded that walking away from the deadlocked negotiations in Brussels would be the “worst possible outcome”, leading to tariffs on imports of dairy products jumping by 45 per cent, on meat products by 37 per cent, and on clothing, footwear, beverages and tobacco by 10 per cent.

This would then feed through into major price rises in shops and supermarkets, hitting households on average by £260 and increasing annual costs for some three million homes by £500 a year.

Ilona Serwicka, research fellow at the UK Trade Policy Observatory at the University of Sussex, said the no-deal scenario is now a possibility and must be avoided.

He added: “Our research shows that this scenario will increase the cost of essential goods, such as food and clothes, which will impact most adversely on those households who already struggle to get food on the table and make ends meet.

“To avoid the real economic danger of a ‘cliff-edge’ scenario – that will see the cost of living for households up and down the country go up – the UK Government must realise that walking away from the negotiating table is the worst possible outcome.”

Drilling down into more detail the report suggests the average price of dairy goods could rise by 8.1 per cent, meat products by 5.8 per cent and transport vehicles by 5.5 per cent.

The report also found that the option touted by some Brexiteers, to eliminate all tariffs unilaterally in the event of no deal, would only yield small benefits and the most well-off households would profit as much as those on lower incomes.

Shadow Brexit minister Jenny Chapman said the report was further evidence that failing to achieve a deal “will hit family budgets” and raised the potential “dire consequences of the Government’s chaotic handling” of the negotiations in Brussels.

A Department for Exiting the EU spokesperson said: “As the Secretary of State said at the close of the latest Brexit negotiations, we have made real progress since June and are continuing with the momentum from the Prime Minister’s speech in Florence.

“We want a deep and special future partnership with the European Union and we are optimistic about achieving this. It’s in everyone's interests we get a free trade agreement that allows for the most frictionless trade in goods and services.”

Theresa May and Jean-Claude Juncker at a meeting in April (Reuters)

While Ms May told the Commons on Wednesday her administration is spending a further £250m on preparing for Brexit, including a no-deal scenario, she conducted an intense round of diplomacy in a bid to end the stalemate in talks.

Downing Street sources insisted Monday’s dinner meeting with Mr Juncker had “been in the diary for weeks”, despite EU officials saying the date was only confirmed in the last few days, after last week’s fifth round of Brexit negotiations ended with little movement.

The dinner on Monday evening was also attended by Brexit Secretary David Davis, Downing Street aide Ollie Robbins, the EU’s chief negotiator Michel Barnier and Mr Juncker’s head of cabinet Martin Selmayr, and saw Ms May underline commitments made in her Florence speech on Brexit.

The Prime Minister and French President Emmanuel Macron also “discussed progress” in Brexit talks during a phone call and agreed to go over “next steps” on the margins of the crunch summit of EU leaders later this week, Downing Street said.

Ms May also agreed “the importance of maintaining constructive progress” in negotiations in a call with Irish Prime Minister Leo Varadkar and reiterated Britain’s commitment to maintaining a soft Irish border.

But the basic Brexit negotiations deadlock over withdrawal issues, including the size of Britain’s “divorce bill”, the Irish border and guaranteeing citizens’ rights, remain in place and are likely to hold up talks on a post-Brexit trading relationship.

Earlier in the day Foreign Secretary Boris Johnson urged the EU to “get on” with beginning “serious” Brexit negotiations on trade, adding: “It’s ready for the great ship to go down the slipway and on to the open sea and for us to start some serious conversations about the future and the new relationship.”

Mr Juncker and Mr Barnier said after the fifth round of Brexit talks finished last week that they would recommend more progress is needed on withdrawal terms, including the divisive issue of the so-called divorce bill.

While the European Council meeting beginning on Thursday is expected to conclude that “sufficient progress” has not been made to progress to trade talks, UK observers will be keeping a close eye on whether any hope of movement is offered.

Theresa May is under pressure from Tory backbenchers to walk away from the negotiating table if trade is not being discussed by Christmas.