Fastest food price rises for 14 years fuel 22% inflation fears

31 August 2022, 09:06

Food inflation has risen to 9.3%, compared with 7% last month, driven by the war in Ukraine and the consequent rise in the price of animal feed, fertiliser wheat and vegetable oils.

The annual increase in fresh food prices jumped to 10.5%, up from 8% in July, with products such as milk and margarine seeing the biggest rises.

The rise in food prices is contributing to wider UK inflation, which the bank Goldman Sachs predicted yesterday could top 22% by next year in the event of continued high gas prices.

British Retail Consortium chief executive Helen Dickinson said: "The situation is bleak for both consumers and retailers, but retail businesses will remain committed to supporting their customers through offering discounts to vulnerable groups, expanding value ranges, fixing prices of essentials, and raising staff pay.

"However, as retailers also grapple with growing cost pressures, there is only so much they can shoulder.

"The new prime minister will have an opportunity to relieve some of the cost burden bearing down on retailers, like the upcoming increase in business rates, in order to help retailers do more to help their customers."

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Mike Watkins, head of retailer and business insight at NielsenIQ, said: "We can expect this level of food inflation to be with us for at least another six months but hopefully some of the input cost pressures in the supply chain will eventually start to ease.

"However, with further falls in disposable incomes coming this autumn as energy costs rocket again, retail spend will come under pressure in the all-important final quarter of the year."

The news comes as the wholesale price of gas tumbled by more than 20%, following signs Europe is preparing to intervene directly in European energy markets.

The European Commission has said it is working "flat out" on an emergency package and a longer-term "structural reform of the electricity market", with reports that Germany would be willing to consider a European price cap on gas.

The EU's intervention will add pressure on the next UK prime minister to introduce their own package of measures to tackle bills when they enter Downing Street next Monday.

While it is not clear what support will be available for those struggling with high energy bills, the business secretary, Kwasi Kwarteng, has said "the UK oil and gas regulator has today granted the required approvals and consents" for the reopening of the undersea Rough gas storage facility - the biggest in the UK.