IN Brief:
- The Treasury plans tariff suspensions covering more than 100 products, including finished foods and ingredients.
- FDF backs cheaper ingredients but warns that lower duties on finished imported foods could disadvantage British factories.
- The federation calls for lower industrial energy costs and wider access to existing energy relief.
The Food and Drink Federation has warned that proposed reductions in UK import tariffs on finished food and drink products could undermine domestic manufacturers, even where suspending duties on ingredients would help processors contain their costs. Its response follows a government package covering more than 100 products, announced ahead of the Autumn Budget, which ministers say is intended to ease household bills. The federation is drawing a distinction between imported inputs used by British factories and finished goods that compete directly with their production.
The Treasury’s list includes garlic, gherkins, citrus jams and marmalades, boiled sweets, toffees, plant-based drinks and chocolate-coated wafers. Some of the published current rates are ad valorem duties, such as 12% on gherkins and 8% on certain confectionery and plant-based drinks; others combine a percentage with a weight-based charge. The actual benefit depends on the commodity, customs classification, origin of imports, quantities and the price charged after the border. These are proposed suspensions or reductions, not evidence that supermarket prices have already fallen.
The government estimates that its latest measures, combined with an earlier food and other product tariff package introduced in June, could reduce consumer costs by £245 million to £595 million a year. This is a combined forecast rather than a measured saving attributable to the newly proposed food categories alone. Passing lower duties through to shoppers is a separate commercial step: importers and wholesalers set prices within contracts and competitive markets, while retailers face other costs for labour, energy, distribution and inventory.
Balwinder Dhoot, Director of Sustainability and Growth at the Food and Drink Federation, said: “Food manufacturers are committed to keeping costs as low as they can for consumers and removing tariffs from key ingredients can help with this. However, we are concerned about removing tariffs on finished food and drink products that are manufactured here in the UK. Doing this would have a limited impact on prices, while hitting British businesses and jobs.”
The distinction reflects how a food factory’s cost base is assembled. Ingredients sourced internationally can be essential to domestic manufacturing even when processing, blending, cooking, filling and packaging take place in Britain. Lower input duties may reduce the landed cost of those materials. A tariff cut on a competing imported finished product, however, can alter the relative selling price without reducing the UK factory’s costs. Whether either change affects investment or employment will depend on the product and the competitive conditions of its market.
Dhoot added: “It’s more expensive to make food and drink here in the UK than in many of our close neighbours, as businesses face such high energy costs. If government wants to help UK shoppers and protect jobs, they would be better off looking at bringing down these costs, for example by extending existing energy relief to include food and drink manufacturing.”
Energy requirements vary considerably across the industry. Chilling and freezing, high-temperature ovens, evaporation, drying, pasteurisation, cleaning and compressed air all contribute to operating expenditure, with some processes requiring continuous utilities to meet safety and product specifications. Power and gas costs therefore affect output economics even where a company’s raw material bills fall. Energy relief policies can also be uneven in their coverage, leaving substantial parts of food and drink manufacturing outside the arrangements available to other sectors.
The proposal puts two kinds of imported goods on different commercial footings. A suspension on a processing ingredient could lower the landed cost of material used in a British factory, while the same measure on a competing finished product could increase price pressure on the goods that factory sells. The consequences will depend on exactly which tariff classifications are covered and whether importers pass lower duties through to customers. The Treasury has also described a separate, business-led system for companies seeking additional duty suspensions, rather than including those applications within this household-cost package.
Food and drink manufacturers also operate under customer contracts that may not adjust immediately when import prices change. A duty suspension can affect spot buying before it affects longer-term supply agreements, while hedging, stock already in circulation and currency movements complicate comparisons. Evidence of the policy’s effect will require tracking specific tariff lines and product prices over time, rather than treating the potential savings estimate as a direct fall in every grocery bill.
The exact tariff classifications, implementation dates and purchasing contracts will decide how far any duty reductions feed into retail prices or UK factory margins. The FDF’s response arrives immediately before the 28 October Budget, with the organisation pressing ministers to address industrial energy costs rather than relying on cheaper competing imports to deliver household savings.
