UK consumers 'unlikely to see long-term fall in prices after Brexit'

UK consumers were unlikely to see any long term falls in prices after Britain leaves the European Union, a leading think tank said on Tuesday.

The Institute for Fiscal Studies (IFS) said there may be some “limited” gains from free trade arrangements, but these would be offset by the 2% rise in consumer prices since the 2016 referendum.

"We estimate that complete abolition of all tariffs would reduce prices faced by households by about 0.7-1.2%," the IFS said in a report, adding that this range was reached using “some quite optimistic assumptions”.

"This could have additional positive economic benefits in the long run but could also be very damaging for some UK industries in the short run," it said.

“That is why some have suggested focusing tariff reductions on goods that the UK does not produce itself. This would result in much smaller gains, reducing the total cost of the basket of goods purchased by the typical household by less than 0.4%.”

The IFS said the average tariff applied on the sorts of goods the UK imports is not particularly high – at around 2.8% taking into account the EU’s various agreements with other countries.

"If we leave the customs union, we can come to our own trade deals with other countries, we can reduce tariffs,” Paul Johnson, the director of the IFS, told the BBC.

"But even if we reduce that as much as possible, the effect on prices will be really quite small relative to what is still a big cost of leaving the customs union because it would make trade with the rest of Europe so much more expensive."