17/10/2017 00:01 BST | Updated 17/10/2017 13:46 BST

'No Deal' Brexit Will Leave Poorest Families £500-A-Year Worse Off, Claims Report

Those worse-off will be the hardest hit by tariffs

Dan Dalton via Getty Images

The UK’s poorest families will be at least £500-a-year worse off with a ‘no deal’ Brexit, a new study has claimed.

Research by the Resolution Foundation think-tank warns dairy, meat and clothes prices will soar if the UK is unable to strike a trade deal with the EU.

Reverting to World Trade Organisation tariffs would see the average price of dairy goods rising by 8.1 per cent, meat products by 5.8 per cent and transport vehicles by 5.5 per cent.

The report, carried out with academics at Sussex University, claims this would see three million families hit with a £500-a-year levy, while the average household would be stung to the tune of £260.

Theresa May has repeatedly claimed that no deal with the EU is better than a bad deal, and last week the Government began publishing detailed reports on how UK customs and trade policy would operate if no agreement is signed.

Ilona Serwicka, a Research Fellow at the UK Trade Policy Observatory at the University of Sussex, argued that ‘no deal’ would impact the poorest households the hardest.

She said: “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.”

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Stephen Clarke, Economic Analyst at the Resolution Foundation, added:  “While trade may not have been the biggest issue in the referendum it is one that will affect the day-to-day living standards of every family in Britain. The government must rightly continue to prioritise a comprehensive new trade agreement with the EU in order to avoid households having to fork out for a ‘no deal’ outcome through higher prices and squeezed households budgets.”

According to the the study, imposing most-favoured nation (MFN) tariffs on the EU would see the cost of importing dairy products imports rise by 45%, meat by 37 per cent, and clothing, footwear, beverages and tobacco by 10 per cent.

By the time the products hit shop shelves, much of the extra cost will have been absorbed, but it will still lead to an almost £10-a-week rise in prices for the poorest families.

In the Customs Bill published on October 9, the Government stated that if the UK leaves the EU without a negotiated settlement it “would apply the same customs duty to every country with which it does not have a trade deal or otherwise provide preferential access to the UK market, such as schemes for developing countries”.

Stephen Doughty MP, supporter of anti-Brexit campaign group Open Britain, said: “It’s clear that the no-deal Brexit Theresa May is threatening will make working people in this country worse off, with the very poorest paying the price for the Government’s ideological choice of a hard and extreme Brexit.

“Leaving the EU with no deal will erect massive barriers to trade. Given that we import 20 per cent of all the food we eat from Europe, this will make the weekly shop more expensive for working families.”

Reuters Photographer / Reuters
Theresa May and David Davis travelled to Brussels for dinner with Jean-Claude Juncker.

The study comes just hours after Theresa May and David Davis held a private dinner with European Commission President Jean-Claude Juncker in a bid to kick-start progress on the Brexit negotiations.

At the end of the fifth round of talks in Brussels last week, the EU’s chief negotiator Michel Barnier said there was “deadlock” over how much the UK should pay in a financial settlement when it leaves the bloc in March 2019.

The EU has vowed not to begin trade talks – which could avoid a ‘hard Brexit’ – until “sufficient progress” has been made on the issue.

The Prime Minister and Juncker issued a rare joint statement stressing that their working dinner in Brussels on Monday night had been “constructive and friendly”.

Labour’s Shadow Brexit Minister Jenny Chapman MP said the Resolution Foundation report showed thepotential dire consequences of the Government’s chaotic handling of the Brexit negotiations.”

She added: “Britain crashing out of Europe without a deal is simply not a viable option. No deal risks price hikes in the shops as a result of extra charges on everyday items, such as food and drink. And yet, the only solution Ministers have offered to this potential crisis is ‘dig for no deal’.

“Theresa May must use this week’s EU Council meeting to end the deadlock in Brexit negotiations and protect Britain from an economic cliff edge. That means agreeing strong transitional arrangements within the single market and a customs union.” 

Tory MP Maria Caulfield MP hit back, saying: “Labour’s willingness to accept any deal the EU offers would sell Britain short.

“Limiting our options and refusing to plan for all possible outcomes makes it harder to negotiate the good deal that we all want. 

“Labour are simply showing their hand in the most important negotiations this country has faced in decades.”