Sugar prices set to rise if no deal Brexit, shows Government Tariff Reference Document
Industrial sugar costs will rise if the UK leaves the EU without a deal on 28 March, as a result of a new post-Brexit tariff regime announced by Government.
New post no deal Brexit tariffs increase EU sugar import costs
Industrial sugar customers across sectors such as food and beverage, pharmaceuticals, brewing and baking are facing an increase in the cost of some raw materials if the UK leaves the EU on 28 March without a deal.
On 13 March, the Government has published its new tariffs, The Customs Tariff (Establishment) (EU Exit) Regulations, potentially leaving only two weeks for businesses to prepare for the prices changes. And the tariffs are likely to remain in place for only one year, possibly resulting in another tariff and price change end-March 2020.
Tariff cost to industry of £37.5m annually
The new €150/t levy on imported white refined sugar for direct consumption, applied because the UK is a deficit sugar market requiring approximately 250,000 tonnes of sugar imports each year, will increase industrial sugar processing costs.
A price increase of this magnitude, which could turn into an annual £37.5m cost rise across the industry, cannot be absorbed by the supply chain, so will be passed on to sugar buyers. This will result in a minimum increase of €150/t for white sugar imported from EU countries.
However, as I write this, MPs have decided that leaving with no deal is not an option and the prospect of an extension is looking possible, adding to uncertainty. An extension could mean this latest tariff notice is irrelevant, but it may be a good indication of what trade negotiators will be seeking out of future trade deals.
What will be the sugar import tariffs post a no deal Brexit?
Should the UK leave on 29 March without a deal, and day-by-day the outcome is looking increasingly unlikely, the new tariffs and resulting price changes will apply after 28 March.
The tariffs on sugar imports into UK for direct consumption will be:
• White refined sugar: €150/t, which is a special tariff as UK is a deficit market
• Raw Cane Sugar €419/t, the default WTO tariff
• Molasses: currently €0/t
• Glucose Syrup: €200/t
Tariffs on sugar imports for refining into white sugar will be:
• Raw Beet Sugar: €339/t, the default WTO tariff
• Raw Cane Sugar: €339/t, the default WTO tariff
The UK would continue trade preference agreements with LDC/LPAs that have existing EU trade agreements.
Who will pay for the sugar tariff increases?
In conclusion, the import of white refined sugar to supply the deficit UK market, which is approximately 250,000 tonnes, will go up by €150/t, if imported from the EU, but reduce to €150/t if imported from outside the EU.
Realistically, though, this sugar will come from within the EU. The consequence of this will be that the UK supply chain won’t absorb the resulting additional £37.5m cost of this sugar coming from the EU.
As a result, the UK white sugar market price is likely to increase by a minimum €100/t post-Brexit.