MPs to quiz supermarkets over UK food inflation, profits and competition in the supply chain
26 Jun 2023 --- UK retailers are to be questioned over the rising costs of groceries in some of Britain’s leading supermarkets. This comes as the nation’s competition watchdog closely monitors spiraling prices which may now show signs of slowing down, but some food items like meat and vegetables are stubbornly high.
In a hearing scheduled for tomorrow (June 27), MPs will question senior representatives from Sainsbury’s, Morrisons, Asda and Tesco about when food prices will likely decline significantly. They also face questions over competition in the supply chain and profit margins over this time period.
Last month, the Competition and Markets Authority (CMA) published a report, “Action to help contain the cost of living pressures.” It describes how the authority is looking into unit pricing practices online and in-store in the groceries sector; specifically, the “complexities and inconsistencies in unit pricing may prevent some people from spotting the deals that give them the best value. This is particularly concerning when prices are rising.”
The CMA will publish the review findings in July.
Spiraling costs in supermarkets
MPs will question senior representatives from several leading grocery chains about when food prices may decline.As part of the MP examination, retailers face questions about how food price inflation has continued to rise, in some cases dramatically. Office of National Statistics (ONS) and the Organisation for Economic Co-operation and Development (OECD) figures show that food inflation in the UK was 19.1% in March, compared to general inflation of 10.1%.
UK food inflation has been exceptionally high for certain types of food (oils and fats, milk, eggs, cheese and yogurt; and ready meals and sauces) and lower for others (such as fruit and fish).
The prices of the inputs into food production have, until recently, been rising more quickly than consumer food prices. In the last few months, however, input price inflation has fallen, but food price inflation has continued to increase.
The ONS data shows that changes in food prices for consumers, on average, lag several months behind changes in input prices.
The report also points out how the Bank of England expects food price inflation to ease later in the year, noting that there are factors contributing to lags between input costs and production output.
The British Retail Consortium has also said food inflation has peaked and that the lag is caused by long-term supply contracts and should be around three to nine months.
Examining shopping baskets’ sky-high costs
Last week UK Prime Minister Rishi Sunak said that weekly shopping bills had “gone up far too much in the past few months” and explained how “we’re looking at the supermarkets, making sure that they’re behaving responsibly and fairly when it comes to pricing all those products.”
But in the same week, Sunak came in for criticism after he postponed the two-for-one ban on junk food until 2025 in England. The key component of the anti-obesity strategy was initially planned for this October but has been deferred by two years while the cost of living crisis continues to bite.
We also reported last week how the UK had recorded two consecutive months of declining food inflation for the first time since the start of the Ukraine war. According to The Office for National Statistics, May’s food inflation fell to 18.3% from 19% in April.
By Gaynor Selby
