Why food prices are increasing so much

Shop prices are increasing at the fastest rate in more than a decade amid the cost of living crisis, new data shows.

The British Retail Consortium has reported a 2.7 per cent year-on-year increase in prices, the highest rate of inflation since September 2011. When it comes to food, prices are up 3.5 per cent – the biggest increase since March 2013.

It follows official data released last week that revealed 92 per cent of people say their grocery bill has increased.

Environment secretary George Eustice was asked about rising costs during a media round on Wednesday, and has been labelled out of touch for his suggested solution – simply buying cheaper “value” items.

When asked how families can deal with soaring food costs, Eustice said: “Generally speaking, what people find is by going for some sort of value brand rather than own branded products they can actually contain and manage their household budget.”

Labour’s shadow chief secretary to the Treasury Pat McFadden said labelled Eustice’s comments “woefully out of touch”.

Earlier this year, food campaigner Jack Monroe highlighted how people already depend on low-budget supermarket staples, with the prices of these items having been hiked substantially.

For example, the cost of the cheapest rice in one supermarket had increased from 45p per kilogram to £1 per 500g.

In fact, according to research from market analysts Assosia, the cost of a basket of basic commodities in the UK has risen by more than 11 per cent, compared with last March – and pasta, milk and instant coffee have all experienced double-digit increases.

The reasons for growing shop prices are complex and wide-ranging – and unfortunately prices are expected to continue rising.

The Bank of England has warned that inflation – which reached 7 per cent in March – could exceed 8 per cent this year.

On Monday, Asda chair Lord Rose accused the Bank of England and ministers of being too “slow” to react to rampant inflation, adding that he fears food prices will remain high for “some time”.

Additionally, the head of Co-op supermarkets warned that “chicken could become as expensive as beef” for the first time in years.

Previously, Miguel Patricio, chief executive for global food giant Kraft Heinz, said high food prices are here to stay, with rising costs not just in the UK, but worldwide, due to a growing population and limited farmland.

Why are food prices so high?

The British Retail Consortium said growing shop prices reflect the impact of energy costs, the war in Ukraine and the Covid-19 lockdown in China.

In the last year, the cost of food has risen by 3.5 per cent, and there was a broad increase in the price of other goods ranging from furniture to electrical products and books.

In February, market analysts Kantar, said grocery prices rose at their fastest pace for more than eight years, with the price of fresh beef, cat food and savoury snacks rising the fastest.

Helen Dickinson, chief executive of the British Retail Consortium, said: “The impact of rising energy prices and the conflict in Ukraine continued to feed through into April’s retail prices.

“This has been exacerbated by disruption at the world’s largest seaport, following Shanghai’s recent lockdown. Food prices continued to rise, though fresh food inflation slowed as fierce competition between supermarkets resisted price hikes on many everyday essentials.

“Global food prices have reached record highs, seeing a 13 per cent rise on last month alone, and even higher for cooking oils and cereals. As these costs filter through the supply chain, they will place further upward pressure on UK food prices in the coming months.

“Retailers will continue to do all they can to keep prices down and deliver value for their customers by limiting price rises and expanding their value ranges, but this will put pressure on them to find cost-savings elsewhere. Unfortunately, customers should brace themselves for further price rises and a bumpy road ahead.”

Mike Watkins, head of retailer and business insight at NielsenIQ, added: “Inflation shows no signs of abating and the increase in non-food prices is an extra challenge for the high street as fragile consumer confidence and rising living costs are likely to negatively affect consumer spending.

“With food retailing no longer immune to these pressures, supermarkets are reacting by cutting the prices of some everyday grocery products including private label to help limit shop price inflation.”  

Additionally, last week the thinktank UK in a Changing Europe (UKICE) released research showing how trade barriers introduced after Brexit had led to a 6 per cent increase in UK food prices between December 2019 and September 2021, further contributing to rising food prices.

Products with a higher EU import share, such as fresh pork, tomatoes and jams, were worse-affected than items like tuna and pineapple, which are more commonly sourced from the rest of the world.

What help is available?

The rising cost of food has been a primary concern for poverty campaigners, with food banks reporting an increase in demand for their services which could force them to ration how much food goes into a parcel.

The Trussell Trust – the largest UK food bank organisation – has a list of food banks you can access on its website.

Yet local authorities have also called for a ‘cash first approach’ to food insecurity, as recommended by the Independent Food Aid Network.

It means prioritising income-based options for people impacted by poverty, ensuring any emergency food parcel is the last resort.

Sabine Goodwin, coordinator for the Independent Food Aid Network, previously told The Big Issue that “a charitable food aid response is unsustainable, undignified, and ineffective”, and argues that income-based, cash first solutions, can be used to end the need for food banks in the UK.

Lowering food prices is an obvious step to help those who are struggling, and supermarkets such as Morrisons and Asda have said they were cutting prices on hundreds of products.

Asda’s Lord Rose said ministers could also help the cost of living crisis by talking to food retailers “to make sure that we are cutting out every extra cost”, and explained that currently supermarket industry rules could be made simpler and more uniform.

It was reported by The Sun that the government was considering slashing tariffs on food which can’t be produced in Britain and has to be imported, such as rice, to help lower prices.

However, last week, the president of the National Farmers’ Union (NFU), which represents the interests of 55,000 food producers in England and Wales, said lowering the tariff wall for imported foods “does not even begin to deal with the problem” of rising food prices.