The era of inexpensive food has concluded in the UK, with food inflation expected to remain high.
- In March, food inflation reached its highest in 45 years at 19.2%, reflecting significant economic challenges.
- Although inflation has marginally decreased to 17.4% by June, economists predict continued high prices until year-end.
- Leading supermarkets acknowledge food inflation may have peaked, but caution that prices will still rise by 10% annually.
- Shrinkflation and price adjustments in essential categories illustrate the broader impact on household grocery expenses.
In the United Kingdom, consumers are grappling with the end of an era characterised by affordable food prices. Economists have highlighted that food inflation reached a staggering 45-year high of 19.2% in March, triggering concerns among retailers and consumers alike. However, by June, this inflation eased slightly to 17.4%. Despite this minor decrease, experts predict that food prices will persist at elevated levels, remaining a significant concern for households.
Discussions with the Bank of England revealed that retailers believe food inflation has likely peaked; nonetheless, a prediction of a 10% annual increase in food prices by the end of 2023 was reported by The Telegraph. Barret Kupelian, a senior economist with PwC, emphasises that although moderation in food inflation is expected, prices will not revert to previously lower levels. Kupelian asserts, “This means that the era of cheap food has probably come to an end in the UK.”
Recent analysis by IGD highlights the effects of rising prices on UK families, with 66% of lower-income households curbing grocery spending. In contrast, 54% have reduced their consumption of food and drink at home, compared to a lower 36% among higher-income households. In response, leading supermarkets have committed to transferring any reductions in commodity prices to consumers as quickly as possible. Key categories witnessing price cuts include dairy, bread, pasta, and rice, as well as fruits, vegetables, meat, and fish.
The phenomenon of shrinkflation is also impacting shoppers, as big-name brands adjust product sizes. June saw notable reductions in popular products’ sizes, such as Hellmann’s mayonnaise jars decreasing from 800g to 600g at Tesco. Similarly, Arla Foods’ Lurpak butter has reduced its block size by 20%, impacting salted, unsalted, and lighter varieties. These adjustments illustrate the broader economic strategies being adopted by brands in response to ongoing inflationary pressures.
The persistent trend of food inflation suggests that high food prices will remain a significant economic challenge in the UK.
