Food prices have surged at the quickest rate in 18 months, delivering another financial hit to struggling households. According to the British Retail Consortium (BRC)-NIQ Shop Price Monitor, food inflation has climbed to 4.2% this month, up from 4% in July, marking the highest level since February 2024.
The latest data reveals that items like chocolate, butter, and eggs have experienced price hikes. Fresh food inflation has accelerated to 4.1% due to rising dairy costs, compared to 3.2% in July. Meanwhile, ambient food inflation has eased to 4.2% year-on-year from 5.1% in the previous month. Overall shop price inflation has risen to 0.9% in August, despite non-food products experiencing a 0.8% price drop.
The recent increase in food prices has been linked to the Bank of England’s earlier statement, attributing the hike to the rise in employer National Insurance contributions in April. The adjustment saw the National Insurance rate for firms increase from 13.8% to 15%, with the earnings threshold for employer contributions lowered from £9,100 to £5,000.
Over 60 retail leaders, including executives from major retailers like Tesco, Sainsbury’s, and Boots, cautioned Chancellor Rachel Reeves against further tax hikes in the upcoming Autumn Budget, fearing a contradiction with her efforts to enhance UK living standards. In a joint letter facilitated by the BRC, these business heads anticipated food and drink inflation to hit 6% later this year.
Helen Dickinson, the BRC’s chief executive, emphasized the strain on families already grappling with the cost of living due to rising food prices. She highlighted that staples such as butter and eggs have seen significant cost increases, driven by high demand, supply constraints, and rising labor expenses. Global cocoa prices have also surged, leading to more expensive chocolate.
Retailers are striving to minimize price escalations for consumers, but the additional costs from the previous year’s budget adjustments have posed challenges. The call to the Chancellor for a halt on further tax increases in the retail sector has gained momentum, with industry experts expressing concerns over the impact on household budgets.
Mike Watkins, head of retailer and business insight at NIQ, pointed out various factors contributing to the price upswing, including global supply expenses, seasonal food inflation influenced by weather conditions, the conclusion of promotional activities linked to recent sports events, and increased operational costs. As households return from summer vacations, many may need to reassess their budgets in response to rising expenses.
