London, UK — Business leaders reacted with fury Wednesday after the British government unveiled a temporary tariff regime that could see higher prices on an array of imports ranging from cars to butter, if the country crashes out of the European Union later this month without a deal.
The tariffs, which would last for up to 12 months, were published hours before lawmakers are expected to vote against the possibility of the country leaving the EU on the scheduled Brexit date of March 29 without a deal. Lawmakers are expected to reject that proposition, a day after they overwhelmingly voted against Prime Minister Theresa May’s divorce agreement for a second time.
“What we are hearing is the biggest change in terms of trade this country has faced since the mid-19th century being imposed on this country with no consultation with business, no time to prepare. This is no way to run a country,” said Carolyn Fairbairn, director-general of the Confederation of British Industry. “This is a sledgehammer for our economy.”
The tariff proposals come amid concerns that a “no-deal” Brexit would have a catastrophic impact on the British economy, driving up costs for businesses, reducing investment and threatening jobs. The government said the plan actually represents a “modest liberalization” of trade rules, with no tariffs on 87 per cent of imports by value.
Though a large chunk of products won’t be facing any extra cost, officials in the Department for International Trade are proposing tariffs and quotas on some goods to help British industries that are currently protected by high EU tariffs or face unfair trading practices, such as state subsidies.
In a statement, the department said the tariff regime is “designed to minimize costs to business and consumers while protecting vulnerable industries.”
The plan is controversial because Britain has enjoyed free trade with the European Union for more 40 years. The proposed tariffs could lead to higher prices for goods such as cars, clothes, beef, chicken and pork imported from the continent. The Bank of England has estimated that inflation could rise from around 2 per cent now to almost 7 per cent within months of a disorderly “no-deal” Brexit.
For example, whole fresh chicken would be subject to a tariff of 19.60 euros (16.83 pounds) per 100 kilograms. That would increase the price of a whole chicken by about 7.8 per cent, based on the current advertised price at Tesco, Britain’s biggest supermarket chain.
But the tariff plan is full of anomalies. British sheep farmers would be protected by tariffs, but vegetable growers would not. Finished cars will face tariffs, but car parts won’t as trade officials seek to protect the supply chains of British carmakers.
Interest groups of all kinds reacted with outrage, even those who had succeeded in securing some measure of safeguard.
Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders, said the announcement does not resolve the devastating effect that no deal would have on the industry.
“No policy on tariffs can come close to compensating for the disruption, cost and job losses that would result from no deal. It’s staggering that we are in this position with only days until we are due to leave. Every day no deal remains a possibility is another day companies pay the price in expensive contingency measures.”
Also problematic is Britain’s decision to treat Ireland differently from the rest of the EU as it seeks to protect the Irish peace process.
Britain says it won’t impose new checks and controls on goods that cross the land border between the Republic of Ireland and the U.K.’s Northern Ireland. As a result, the proposed tariffs won’t apply to products crossing the border.
Though there are fears that Northern Ireland will become the back door for EU goods to enter the U.K., new laws will be introduced to crack down on anyone trying to exploit the system. Authorities don’t plan to introduce checks or controls at Irish Sea ports, but will rely on intelligence to police tariff dodgers.
But underlying the complex nature of trade matters, businesses in Northern Ireland cried foul, arguing that the tariff measures made the playing field uneven.
Colm Shannon, CEO of the Newry Chamber of Commerce & Trade, said EU companies would be able to get access to the U.K., but companies in Northern Ireland could potentially face tariffs if they try to export into the EU.
“It is an unfair advantage to EU companies wanting to export into Northern Ireland,” he said. “Our little companies will suffer.”
Even as the government prepared for the worst-case scenario, Treasury chief Philip Hammond warned that the economy would be placed at risk if the country crashed out without a deal.
“We are not where I hoped we would be today,” Hammond said while delivering his Spring Statement, a budget spending snapshot.
“Our economy is fundamentally robust, but the uncertainty that I hoped we would lift last night, still hangs over us. We cannot allow that to continue: It is damaging our economy and it is damaging our standing and reputation in the world.”
Adam Pemble in Newry, Northern Ireland, contributed to this report.