Why your food shop is getting more expensive

Yahoo

2 days ago

Increased food and fuel prices are driving UK inflation, which rose more than expected last month, according to government figures.
The Office for National Statistics (ONS) reported that the Consumer Prices Index (CPI) rose to 3.6% in the year to June, up from 3.4% in May — the highest rate since January 2024. Food prices rose by 4.5% in the year to June, marking the steepest annual increase since February, according to official data — though the rate remains significantly below the highs recorded two years ago.
Richard Heys, acting chief economist at the ONS, said: 'Food price inflation also increased for the third month in a row, reaching its highest annual rate since February last year — though it remains well below the peak of early 2023.' Industry figures say the unexpected rise reflects mounting pressure on food producers, who are grappling with rising energy bills and government changes to national insurance and minimum wage.
The CPI is a measure of the average change over time paid by consumers for a market basket of consumer goods and services. It is seen as a key indicator of inflation, which remains below the post-covid double-digit levels. The latest increase is likely to weigh on British households experiencing a cost-of-living crisis and complicate any Bank of England decisions on lowering interest rates.
British consumers would have noticed the spike in costs in their shopping baskets in recent years, and today's news would have come as no surprise.
The figures come amid growing scrutiny of chancellor Rachel Reeves' April budget, which crucially imposed tax rises for employers in the form of a £25bn increase in national insurance contributions. This came as the Labour minister announced rises in the National Living Wage and National Minimum Wage, which affected thousands of lower-paid workers.
The increase in employer contributions is a factor behind rising business costs and may represent businesses passing on the costs to the consumer. Kris Hamer, director of insight at the British Retail Consortium, (BRC) said that the last budget had an 'ongoing' impact to food inflation.
'Despite fierce competition between retailers, the ongoing impact of the last budget and poor harvests caused by the extreme weather have resulted in prices for consumers rising," he said.
Last month the trade body said rising fruit and vegetable prices contributed to a jump in food price inflation caused by weather patterns around the globe. The BRC, representing more than 200 major UK retailers, said 'hot, dry weather' had reduced harvest yields and fuelled some of the rise in prices.
Helen Dickinson, the BRC chief executive, said: 'We predicted a significant rise in food inflation by the end of this year, and this has been accelerated by geopolitical tensions and impacts of climate change.' Within the figures, increased costs for meat, coffee and chocolate fuelled high levels of inflation, with prices in staples like bread and whole milk also increasing.
Costs for meat, in particular beef, have risen due to high demand and low supply affected by higher production costs and an increase in the national minimum wage. The increase is being attributed to global demand and rising production costs, including feed, energy, and labour.
Coffee prices have also seen an increase after bad weather hit production in Brazil and Vietnam while high temperatures and an infection called cacao swollen shoot virus hampered cacao harvests in west Africa. The Food and Drink Federation (FDF) said that electricity and gas prices had steadily increased during 2024, after increasing by up to five times in previous years, with more uncertainty to come.
Balwinder Dhoot, Director of Industry Growth and Sustainability, FDF said: 'Manufacturers are grappling with rising energy and commodities prices, alongside the impact of looming government policies.'
The CPI indicates that food prices have risen by 4.5% in the year to June, after a large spike in price rises that began in June 2021 and peaked in June 2023, before slightly dropping off.
The Association of Independent Meat Suppliers reports that beef prices have surged by over 30% in the past year, with the FDF highlighting a 44% increase.
Consequentially, the cost of a 350kg prime cattle carcass rose by an average of £738 compared to June 2024, the Agriculture and Horticulture Development Board (AHDB) said.
Coffee has also seen a 46% increase according to the FDF, with analysis by the consumer group Which? finding that 11 out of 12 instant coffees at six big grocery retailers had risen.
On average coffee prices increased by at least 8% up until February 2025 compared with the same period in 2024.
For example, a 200g jar of Nescafé Original was 40% more expensive at Ocado at an average of £7.91 compared with an average £5.65 a year earlier.
Up until May this year chocolate prices rose at the fastest pace on record, 16.5 per cent in a year, according to the Which? supermarket food and drink inflation tracker.