Wake up and smell the (more expensive) coffee: how Brexit is already hitting families - People's Vote

Wake up and smell the (more expensive) coffee: how Brexit is already hitting families

New research published today (Friday 19 April) shows everyday goods from coffee to bananas have been hit by a Brexit-related price hike as Britain has been forced to shell out a minimum of an extra £15 billion since June 2016 as a result of the pound’s devaluation since the referendum.

It’s not just consumers who have been hit by the cost of Brexit – business and industry have been hit hard too – with a £4.5 billion bill for machinery and transport equipment the biggest single additional cost.

These costs are just the minimum – as data for imports bought with foreign currency only exist for trade with non-EU states. Given that close to half of the UK’s trade is with the EU the actual bill for the Brexit squeeze could be twice as large.

 

Key items which have gone up in price include:

  • Filter coffee – up from £2.77 to £3.06 for a half pound (227g) pack (10% increase)
  • Bananas - up from 85p per kilo to 94p (10% increase)
  • Wine – a glass of wine bought in a pub or restaurant has increased in price by 30p (8% increase)
  • Laptop computers – in the US the price of a MacBook has been frozen but in the UK it has risen by £200 (19%)
  • Heating your home – oil, gas and many other fuels are priced and bought in US dollars and the Brexit devaluation has driven up the cost of domestic energy bills by an estimated £75 a year.

 

Figures published by the government show that most imports from outside the EU were paid for in US Dollars (67%), Euros (5%) or Canadian Dollars (3%) in 2018. The plunge in the value of the pound against these currencies, which was a direct consequence of the decision to leave the European Union, means that we have to spend more money than we did in early 2016 just to get the same goods.

Researchers compared the average exchange rate in 2018 to the value of the pound in May 2016, just before the Brexit referendum. They found that imports in the three most commonly used currencies were £15 billion more expensive than they would have been in 2016. This is more than £288 million a week.

The biggest extra expense came from machinery and transport equipment, for which Britain paid £4.5 billion more than it would have in 2016. Included in this category are computers and televisions. For a simple comparison, the cheapest MacBook now costs £1,249 from the Mac store, and $1,299 in the US store. In early 2016 a similar model, which also cost $1,299 in the US store at the time, was available for £1,049 in the UK. So, like for like, prices have increased by £200, or 19%.

Britain also spent £2.9 billion extra on mineral fuels, lubricants and related materials. A UCL study showed that wholesale prices of gas and electricity in the UK went up by 16% and 18% respectively in the year after the referendum. The researchers calculated that this added an average of £75 a year to people’s energy bills.

The figures published by the government are only for imports from outside the EU, so the £15 billion figure applies only to those imports. Imports from inside the EU are predominantly paid for in Euros and will also have been more expensive.

The analysis is based on government figures giving the currency of invoice for the UK’s non-EU imports. Embarrassingly for the government, the figures in the report had to be corrected on Friday, because they mistakenly overstated British imports from non-EU countries by £300 billion.

 

Commenting, Jo Swinson MP, leading supporter of the People’s Vote campaign and former Consumer Affairs minister, said:

“The great Brexit squeeze is already leaving many families worse off and making it more difficult for British businesses to invest and compete.

“A Brexit elite might hope to profit from leaving the EU but for millions of people who are just about managing, leaving the EU offers no answers to the problems of everyday life.

“We now know that any Brexit deal will be a million miles away from what was promised in 2016, inflicting real costs on our country and resulting in years more negotiations and arguments.

“At the same time, support for a People’s Vote is continuing to grow across every political party and among some of those who voted Leave in the last referendum - as well as those who voted to stay in the EU.

“It is neither fair nor reasonable to force a particular form of Brexit on the public without letting them decide whether or not we should go ahead.

“That’s because giving the public the final say is ultimately the only way to deliver a stable settlement that can command the confidence of both Parliament and the country.”

/ends

 

Notes to Editors

Exchange rates:

Currency

2018 Average

May 2016 Average

Dollar

1.334801

1.452412

Euro

1.130081

1.281442

Canadian Dollars

1.729693

1.878072

Source for exchange rates: OFX

 

Invoice currencies:

Percentages of imports paid in different currencies taken from “Table 1: Percentage of currency of invoice by SITC section for Non-EU Imports 2018” in the government’s 2018 Non-EU trade in goods by declared currency of invoice.

Calculations:

Invoice Currency

US Dollar

Pounds Sterling

Euro

Canadian Dollar

All others

Total trade (£m)

Percent Paid for in currency

67.4

21.1

5.1

3.3

3.1

237,305

Total spent in 2018 £ millions

159,944

50,071

12,103

7,831

7,356

237,305

Total Home Currency 2018 (millions)

$213,493

£50,071

€13,677

$13,545

N/A

N/A

Total in May 2016 £ millions

146,992

50,071

10,673

7,212

7,356

222,305

Extra Paid £ millions

£12,952

£0

£1,430

£619

N/A

15,000

 

Extra Costs by SITC Category (£ millions):

 

Invoicing Currency

SITC Category

US Dollar

Euro

Canadian Dollar

All others

Total cost (£m)

Food and live animals

506

138

5

N/A

650

Beverages and tobacco

23

19

0

N/A

42

Crude materials, inedible, except fuels

276

26

9

N/A

311

Mineral fuels, lubricants and related materials

2887

9

0

N/A

2896

Animal and vegetable oils, fats and waxes

33

1

0

N/A

35

Chemicals and related products, not elsewhere specified

726

195

2

N/A

924

Manufactured goods classified chiefly by material

1313

162

2

N/A

1477

Machinery and transport equipment

3780

650

23

N/A

4453

Miscellaneous manufactured articles

2043

230

10

N/A

2283

Commodities and transactions not classified elsewhere in the SITC

1372

3

558

N/A

1933

Total

12952

1430

619

N/A

15004

Source for Government being forced to correct their figures:

Politics Home

 

Sources for examples:

Computers:

As an illustrative example the cheapest MacBook now costs £1,249 from the mac store (link), and $1,299 in the US store (link). In early 2016 a similar model, which also cost $1,299 in the US store at the time, was available for £1,049 (link). So prices have increased by £200, or 19%.

Wine:

Wine in general became more expensive following the vote to leave the European Union. Wine is, of course, imported from Europe, but also from the US and Australia, against whose currencies the pound has also fallen.

The ONS says a glass of wine was, on average £3.60 in June 2016, but now it is 30p more expensive at £3.90, and increase of more than 8% (link).

Coffee:

Like many of the things we import, coffee is usually paid for in dollars on the global market. When the pound fell against other currencies, prices for goods like coffee went up.

According to the ONS, the average price of 227g of filter coffee was £2.77 in June 2016. Now it has increased by 39p to £3.06, a 10.4% increase (link)

Similarly, the average price of 100g of instant coffee was £2.66 in June 2016, but is now £2.97. The 31p increase represents a rise of 11.7%.

Bananas:

Again, bananas are usually paid for in dollars on the global market. According to the ONS, the average price of a kilo of bananas was 85p in June 2016, but has increased by 9p to 94p, an increase of 10.6% (link).

Energy bills:

A study from UCL found that consumers paid on average £75 more for their energy in the year following the referendum result, due to the depreciation of the pound (link). It found that wholesale electricity prices went up 18% in that year, whilst wholesale gas prices went up 16%.