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Retailers warn of price rises if agreement on tariffs is not agreed before Brexit

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The spectre of empty supermarket shelves returned to haunt the UK as fears grew over the fall-out from Britain’s exit from the European Union.

Tesco PLC (LON:TSCO) chairman, John Allan, suggested in an interview that food prices could rise substantially if a Brexit deal is not reached.

A “no-deal” outcome would trigger tariffs that are “quite substantial on some food items”, Allen said.

While urging shoppers not to panic buy, Allen also raised the prospect of a shortage of some food items, especially short-life fresh foods, while the EU and Britain get their act together on the logistics front.

“I think that will only be for a limited period, perhaps a month or two before we get back to normal,” Allan said.

Over the border – the one that separates England from Scotland – the Scottish Retail Consortium has echoed the Tesco chairman’s words, warning that without a trade deal “there is little retailers can do to insulate consumers from the impact of £3bn of new tariffs on food in our supermarkets and grocery stores, as four-fifths of UK food imports come from the EU”.

“Moreover, new checks and red tape that will apply from January 1 will create additional headaches in the supply of many goods that come from or through the EU.

“The UK government must strain every sinew to agree a zero-tariff agreement, or else it will be Scottish shoppers who pay the price,” said David Lonsdale, the consortium’s director.

Panic not, though because our supplies of Peroni beer are probably safe.

Food delivery technology specialist Ocado Group PLC (LON:OCDO) said it is stocking up on long-life products such as Italian beer in readiness for a no-deal Brexit. The bad news is that, according to Ocado chief executive Tim Steiner, the group would need four times the amount of warehouse space it has to store a month’s worth of inventory.

The European Commission gave some idea today what its contingency measures would be in terms of air, sea, rail and road freight would be in the event of a deal between the EU and Britain failing to be concluded.

The measures are designed to ensure basic reciprocal air and road connectivity between the EU and the UK, as well as allowing for the possibility of reciprocal fishing access by EU and UK vessels to each other’s waters.

These contingency measures aim to cater for the period during which there is no agreement in place. If no agreement is applied, they will end after a fixed period, the European Commission said.

The EU’s contingency measures were themselves contingent on Britain reciprocating on the same basis but seeing as Britain’s disinclination to subscribe to what the EU terms “a level playing field” is one of the issues most likely to lead to a deal not being agreed, the European Commission’s contingency plans may prove to be in vain.

The European Commission also said it would seek “continued reciprocal access by EU and UK vessels to each other’s waters after 31 December 2020” – another sticking point in the Brexit negotiations.

The Foreign Secretary, Dominic Raab, conceded that failure to strike a trade deal with the EU would cause “some bumps along the road” but gave short shrift to the Tesco chairman John Allen’s suggestion that food prices could rise by 5% in the event of no deal being secured.

“Of all the things that will be a challenge, I am not concerned about either supermarket cupboards running bare or the cost of food prices,” Raab said in a radio interview.

Not surprisingly, Raab is of the view that it is the EU that will have to erase its “clear red lines” before an agreement can be reached.

“Particularly from the UK side, we look at the differences on fairly key points of principle – fairly narrow in scope, we are talking about fisheries, level playing field commitments, the EU’s attempt to lock us in to their rules – we need to see substantial movement,” Raab said.

Meanwhile, journalists who attended a press briefing at 10 Downing Street this afternoon were none the wiser whether the UK was on board with the EU’s contingency plans.

Lord Frost, Britain’s Brexit negotiator, and Michel Barnier, his EU counterpart, are set to be back at loggerheads in Brussels this afternoon.

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