Persistent price hikes: food costs climb for the fourth consecutive month
Food prices in the UK experienced their fourth consecutive month of growth in May, as inflated costs resulting from the government's workers' rights overhaul and the forthcoming packaging tax fuel a projected increase in prices.
According to data from the British Retail Consortium (BRC), the average cost of food rose by 2.8% year-on-year in May, compared to an increase of 2.6% in April. The upward pressure on food prices was particularly prevalent in fresh foods, where prices increased by 2.4% year-on-year in May.
The cost of wholesale beef and staple goods like steaks also played a role in the price hikes, contributing to a rising cost burden for retailers. Despite the increasing costs, overall shop prices remained in deflation, with the average shopping basket 0.1% cheaper than a year ago in May.
While aggressive promotional campaigns have temporarily kept shop prices low in recent months, there are signs that this period of downward price movement may be coming to an end. The impact of April's hikes to employer National Insurance contributions (NICs) and minimum wage are being felt by businesses, sparking further price rises across the fashion and furniture sectors in May.
According to Helen Dickinson, the BRC's chief executive, the cost burden being placed on retailers by the government is leading to inflation. She stated that it's "no surprise that inflation is rearing its head once again," as retailers now face additional £5bn in costs from increased NICs and living wage hikes.
Dickinson further warned that two significant policy changes in the near future will exacerbate inflationary pressures. The introduction of the new packaging tax will impose an additional £2bn in costs on retailers, while the Employment Rights Bill is expected to bring further employment-related expenses.
The BRC called upon the government to ensure the Employment Rights Bill promotes workers' rights while maintaining job and investment growth. They cautioned that if statutory costs for retailers continue to rise, consumers should brace themselves for further price increases in the coming months.
The ongoing increase in food prices, coupled with the forthcoming packaging tax, raises concerns for consumers about potential future hikes in food-and-drink costs. The government's recent policy changes, such as increased employer National Insurance contributions (NICs) and minimum wage, are causing additional financial burdens for businesses in various sectors, including finance and lifestyle, which might lead to increases in prices for insurance and other services.
