UK food inflation increases by more than 2%, reveals British Retail Consortium

Food inflation in the UK increased to 2.1% year-on-year in February, driven by hikes in breakfast product prices, the latest British Retail Consortium (BRC) and NielsenIQ Shop Price Index shows.

Items such as butter, cheese, eggs, bread, and cereals all increased in price, and soaring global coffee prices also contributed to the climb. The rise to 2.1% was against growth of 1.6% in January, which was above the three-month average of 1.8%.

Fresh food inflation increased to 1.5% year on year in February, against growth of 0.9% in January (above the three-month average of 1.2%). Meanwhile, ambient food inflation increased to 2.8% year on year in February, against growth of 2.5% in January (above the three-month average of 2.7%).

Helen Dickinson, CEO of the BRC, says: “While shop prices remained in deflation in February, prices in the month saw the biggest increase in the last year. Breakfast, in particular, got more expensive as butter, cheese, eggs, bread, and cereals all saw price hikes.” 

“Climbing global coffee prices could threaten to push the morning costs higher in the coming months. ”

Rising geopolitical tensions

Dickinson also warns that inflation is likely to rise across the board as the year progresses, with geopolitical tensions running high and the imminent £7 billion (US$8.5 billion) increase in costs from the Autumn Budget. She describes the government’s new packaging levy as “poorly designed.”

In January, around 67% of leading retailers surveyed by the BRC said they would raise prices in response to the government’s National Insurance contributions increase, while more than half said they planned to reduce workers’ hours and overtime.

“We expect food prices to be over 4% up by the second half of the year. If the government wants to keep inflation at bay, enable retailers to focus on growth, and help households, it must mitigate the swathe of costs facing the industry. It can start by ensuring no shop ends up paying more than they already do under the new business rates proposals and delaying the new packaging taxes,” Dickinson adds.

Despite the negative outlook for food inflation in February, shop price inflation remained unchanged at -0.7% year-on-year in February, against a decline of -0.7% in January. Meanwhile, non-food inflation decreased to -2.1% year on year in February, against a decline of -1.8% in January.

Mike Watkins, head of retailer and business insight at NielsenIQ, says: “With many household bills increasing over the next few weeks, shoppers will be looking carefully at their discretionary spend, and this may help keep prices lower at non-food retailers. However, the increase in food inflation is likely to encourage even more shoppers to seek out the savings available from supermarket loyalty schemes.”