The UK’s latest set of inflation statistics were published on Wednesday (24 May) and painted a troubling picture of the cost of living crisis.
While the headline percentage for the Consumer Prices Index (CPI) showed the rate of price rises across the economy slowed from 10.1% to 8.7% between March and April 2023, the fall was not as large as economists, including those at the Bank of England, had expected.
Core inflation - a metric that strips out categories which tend to see big price fluctuations, like energy and food - actually increased month-on-month, rising from 6.2% to 6.8%. It all means household budgets are continuing to be squeezed, while the value of savings is being eroded.
What the data also told us was that the UK is an outlier among comparable economies. Its CPI and core inflation figures are the highest among the G7 nations. But NationalWorld analysis of the UK statistics and international inflation data has found the country is also now the worst-hit major European economy when it comes to food price inflation.
So, why are food prices so high in the UK - and how does it compare on the European stage?
How high is UK food inflation?
According to the latest CPI compiled by the Office for National Statistics (ONS), the rate of food price hikes fell back marginally from 19.6% to 19.3% in April 2023.
This figure means cost increases are still hitting consumers at a rapid rate that’s well above the headline rate of inflation. Indeed, the previous month’s figure was the highest for 45-years.
The way to view this figure is that the cost of a typical food item has risen in price by 19.3% since April 2022. To put that in real terms, something that cost £1 a year ago is now likely to be almost 20p more expensive.
Within the headline food statistic, some fridge and food cupboard staples have jumped in price at an alarming rate. Sugar is up 47.4% in price compared to a year ago, while the cost of olive oil (46.4%) and eggs (37%) has also rocketed. The majority of food sub-categories are seeing their respective inflation rates increase, with only five out of the 43 food subcategories the ONS looks at every month now in single-digits.
When you take into account that the Bank of England’s inflation target is 2% - a rate which is deemed to promote a healthy level of spending across the UK economy - it is clear to see that food prices are running at an unsustainable level for household budgets.
Why are UK food prices so high?
There are several reasons why food prices are so high in the UK.
Principal among them has been the Russia-Ukraine war, which has driven up the cost of farming inputs and key ingredients. Soaring energy, fuel, fertiliser and feed costs have forced farmers to either cut back production or attempt to pass their higher prices down the food supply chain.
Poor weather has also played its part. The UK CPI for February 2023 rose unexpectedly due to supermarket shortages of tomatoes and peppers that were caused by bad weather in Spain and Morocco (as well as a lack of early season planting in UK greenhouses).
Another potential cause is greedflation (i.e. the hiking of prices to boost profit margins). Supermarkets have denied they are keeping prices artificially high, with Sainsbury's boss Simon Roberts telling the BBC on Friday (26 May) that major retailers were actually taking a hit on shelf prices in a bid to "battle inflation". Regulator the Competition and Markets Authority (CMA) has said it has not seen any evidence of it “at this stage” but is monitoring the situation. Chancellor Jeremy Hunt met with food bosses on Tuesday (22 May) in an apparent bid to apply pressure on them to pass any price drops onto consumers more quickly.
Commodity prices (i.e. the cost of the basic ingredients that go into the food we eat) have been gradually falling since last summer, according to the UN Food and Agriculture Organisation (FAO), but it can take many months for these to feed into lower shelf prices.
How does UK food price inflation compare internationally?
Since the beginning of 2022, the major European nations have generally followed a similar path when it comes to food inflation. Indeed, the issues driving the price rises on the continent have been largely the same as they have in the UK.
The Russia-Ukraine war has driven up costs for farmers - for example, making it more expensive to heat greenhouses that produce crops like tomatoes and upping the price of animal feed and fertiliser. Weather has also played its part, with droughts and intense heat generating shortages that have translated into price hikes. And, like we have started to see here in the UK, European consumer groups are also beginning to blame the pricing situation on the ‘greedflation’ of supermarkets - something retailers deny.
While most of the countries NationalWorld has looked at have seen a similar pattern of food inflation, there has been one outlier: Germany. Europe’s largest economy relied on Russia for 60% of its gas meaning it was particularly exposed to the price shocks stemming from the war in Ukraine. The move to raise its minimum wage up to €12 an hour in October 2022 has also been blamed for increasing inflation.
The country was leading the way by some margin between July 2022 and March 2023, with its food price rises peaking at a rate of 22.3% this spring. But in April, it saw a big deceleration in its rate to 17.2% - closer to the EU average of 16.6%. It appears to be partly down to how much food prices jumped last April, when they climbed 2.4 percentage points.
With Germany’s rate falling, the UK is now the worst-affected major European economy when it comes to food prices, according to the latest set of international CPI data for April 2023.
As for the other countries listed, some of the figures have been recorded after targeted measures to reduce food prices. Spain’s 3.7 percentage point drop in food inflation has come after its government cut VAT on food products from 21% to nothing in January - although there is debate in the country as to whether the tax cut has been the driver of the inflation slowdown the government claims it has been.
In France, where the rate fell from a peak of 15.9% in March to 15% in April, the government has labelled the three months between April and June the ‘anti-inflationary quarter’. As part of this drive, it has negotiated a loose agreement with leading supermarkets that will see them slash the cost of staple items and keep them there throughout the period. But this does not appear to have slowed supermarket inflation by that much in the country, its official statistics show.
While the other nations we’ve listed have lower food inflation than the UK, the fact that all of them remain in double digits suggests consumers are still being hit hard in these comparative economies. Not that that will provide any comfort to people in this country who are struggling to afford their weekly shop.