The price of bread and cereals could rise by up to 30%, while milk, cheese, and eggs prices could increase by 46% if tariffs and trade costs were introduced.
That is according to a study published by the Economic and Social Research Institute (ESRI), entitled Brexit and Irish Consumers, which used a number of Brexit scenarios to examine the price increase of a range of imported goods.
The study says a hard Brexit would increase the cost of living for all households by 2% to 3.1% — an annual increase of €892 to €1,360 per household.
The smaller figure reflects an increase in non-tariff trade costs and the latter reflects tariffs plus other trade cost increases.
The effects would not be evenly distributed. Poorer households would face increases of 70% more than the wealthiest. This is because lower-income households spend a larger portion of their income on products that would be most affected by increases in trade and tariff costs, such as food.
The poorest household groups allocate up to 15% of their total expenditure to food. This falls to 8% for the highest income group.
The report’s authors, Martina Lawless, associate research professor at ESRI, and Edgar Morgenroth, professor of economics at Dublin City University, said: “This is an important determinant of our overall results as food products have the highest tariff listings in the EU’s World Trade Organisation [WTO] tariff schedule, which we assume would be the fallback position in the absence of a trade deal or transition agreement by the Brexit deadline of March 2019.”
In other words, WTO rules would apply. Tariffs would be imposed on goods the UK sends to the EU, and on goods the EU sends to the UK. Some 28% of Irish goods imports originate in the UK.
Prof Lawless said the increases envisaged in their report reflect “a worst case scenario”.
“This is the upper bound of what could happen if a deal is not done,” she said. “This is very much regarded as a worst-case scenario.”
She said their estimates do not take into account switching of products or changes in expenditure patterns in response to cost increases, and for this reason, are likely to reflect the maximum increase in the cost of living.
The study, published today, was commissioned by the Competition and Consumer Protection Commission.
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