Food prices have surged at the quickest rate in 18 months, delivering a blow to households already facing financial challenges. Food inflation has risen to 4.2% this month, up from 4% in July, as reported by the British Retail Consortium (BRC)-NIQ Shop Price Monitor, reaching its highest level since February 2024.
The cost of items like chocolate, butter, and eggs has escalated, with fresh food inflation surging to 4.1% due to increasing dairy prices. On the other hand, ambient food inflation has decelerated to 4.2% year-on-year, compared to 5.1% in the previous month. Despite a 0.8% deflation in non-food products, overall shop price inflation has climbed to 0.9% in August.
The rise in food prices follows a statement from the Bank of England, attributing the acceleration in food prices to the increase in employer National Insurance contributions in April. The National Insurance rate for firms rose from 13.8% to 15%, while the threshold for employers to start paying National Insurance dropped from £9,100 annually to £5,000.
Over 60 retail leaders, including executives from Tesco, Sainsbury’s, and Boots, cautioned Chancellor Rachel Reeves against further tax hikes in the upcoming Autumn Budget, expressing concerns that it could hinder efforts to enhance UK living standards. These industry figures anticipate food and drink inflation to hit 6% later this year.
Helen Dickinson, CEO of the BRC, highlighted that food price escalations are adding pressure to families already grappling with living costs. The surge in prices for staples like butter and eggs is driven by high demand, limited supply, and increased labor expenses. Global cocoa prices have also contributed to the rise in chocolate prices due to poor harvests.
Retailers are striving to mitigate price hikes for consumers, but the influx of £7 billion in new costs from last year’s budget, as recognized by the Bank of England, has presented challenges. In response, retail CEOs have urged the Chancellor to avoid additional tax increases on the retail sector this autumn.
Mike Watkins, head of retailer and business insight at NIQ, explained that price increases reflect various factors, including global supply costs, seasonal food inflation influenced by weather conditions, the conclusion of promotional activities tied to recent sports events, and a rise in operational expenses. As consumers return from summer vacations, many may need to reassess household budgets to adapt to rising living expenses.