Food prices have surged at the quickest rate in 18 months, dealing a blow to households already facing financial challenges. The latest data from the British Retail Consortium (BRC)-NIQ Shop Price Monitor reveals that food inflation rose to 4.2% this month, up from 4% in July, reaching its highest level since February 2024.
The cost of essential items like chocolate, butter, and eggs has notably increased, with fresh food inflation spiking to 4.1% due to escalating dairy prices. Conversely, ambient food inflation slowed to 4.2% year-on-year from 5.1% in the previous month. Overall shop price inflation climbed to 0.9% in August, despite non-food products experiencing a price deflation of 0.8%.
This surge in food prices follows the Bank of England’s statement earlier this month attributing the acceleration to the rise in employer National Insurance contributions in April. The National Insurance rate for firms has surged from 13.8% to 15%, while the earnings threshold for employers to start paying National Insurance has been reduced from £9,100 annually to £5,000.
Retail industry leaders, including executives from major companies like Tesco, Sainsbury’s, and Boots, cautioned Chancellor Rachel Reeves last week against further tax hikes in the upcoming Autumn Budget, expressing concerns that such actions could conflict with efforts to enhance living standards in the UK. In a joint letter facilitated by the BRC, these executives forecasted food and drink inflation to reach 6% later this year.
Helen Dickinson, CEO of the BRC, highlighted the challenges posed by the surge in food prices, emphasizing the significant price increases in staples like butter and eggs due to heightened demand, constrained supply, and increased labor expenses. Global cocoa prices have also pushed up chocolate prices due to poor harvests.
Industry experts, such as Mike Watkins of NIQ, attribute the price uptick to various factors, including global supply costs, seasonal food inflation influenced by weather patterns, the conclusion of promotional activities tied to recent sports events, and a rise in operational expenses. As consumers return from summer vacations, many may need to review household budgets in response to escalating household expenses.
