Supermarkets ‘cashing in on rising food prices’
A new report claims the price of food on the supermarket shelf is rising faster than inflation – and British consumers are feeling the pinch more than anyone in the developed world.
Food prices in Britain are rising more than twice as quickly as in the Eurozone, investment bank UBS has said.
According to the bank, UK prices are rising at an annual rate of 4.9 per cent, compared with 3.6 per cent in Germany, a Eurozone average of 1.8 per cent and an increase in the US of 1.5 per cent.
The figures show that British supermarkets are raising food prices faster than inflation, opening the sector up to accusations that it is profiteering on the back of rising raw materials.
UBS says that, while the cost of raw foodstuffs has risen in the last few months, commodity price inflation would only justify a 3 to 3.5 per cent increase in processed food prices,
But supermarkets have increased prices by 6 per cent to 6.5 per cent.
UBS economist Paul Donovan, who co-wrote the report, said: “That suggests there may be margin expansion in the supermarket sector. Prices are rising in excess of justifiable cost increases.”
He said price increases by supermarkets are adding 0.3 to 0.5 percentage points to the official consumer prices index of inflation, which increased to 4 per cent – twice the Bank of England forecast – last month.
The research also showed that shoppers are seeing steeper rises in food prices than any other of the 34 members of the Organisation for Economic Co-operation and Development (OECD).
Mr Donovan said the weak pound is contributing to the higher-than-average UK increase, as 18 per cent of food consumed in the UK is imported, but the scale of inflation means British supermarkets are more likely to face political pressure over the issue.
The report says: “Looking at the perception of food price inflation, along with whether food price inflation is justified by cost pressures, the UK seems most likely to see political agitation over food prices.
“UK food prices are rising more rapidly than most other OECD economies’ food prices, and have significantly outstripped food retailers’ cost inflation.
“This could allow UK politicians to suggest that food price inflation is ‘unfair’ or ‘excessive’.”
It said supermarkets could come under political and media pressure to cut prices, or even face another competition inquiry.
A British Retail Consortium spokesman said: “There is no question that grocery prices in this country are still lower than most other European countries because of our intensely competitive supermarket industry.
“Food prices have not risen at anything like the same rate as commodity prices. It is clear that supermarkets are shielding customers from the full impact.”
