Food prices likely to rise as Covid-19 takes toll on supply chains

UK food prices are likely to rise according to retailers, as labour shortages, and supply chain disruption caused by Covid-19 take their toll.

Figures collated by the British Retail Consortium showed food inflation eased to 1.1% in March, down from 1.6% in February. This is below the 12- and 6-month average price increases of 1.6% and 1.4%, respectively.

Fresh food inflation eased for the third consecutive month. In March, fresh food prices rose by 0.4% – the lowest inflation rate for the category since March 2018.

Meanwhile, ambient food inflation slowed sharply to 2.0% in March down from 3.0% in February. The figure is below the 12 and six-month average price increases of 2.4% and 2.6%, respectively.

However, the slowdown in inflation is unlikely to last, Helen Dickinson OBE, chief executive, British Retail Consortium said.

“As of the first week of March, when our price collection took place, shop prices were pushed further into deflationary territory, with food inflation easing and non-food prices continuing to fall,” Dickinson said.

“Fresh food prices rose by a modest 0.4%, as lower global prices in 2019 filtered through, limiting the price rises of meat, dairy and fish products. Non-food prices fell again in March as household spending remained low.

There are a number of price pressures arising from the coronavirus crisis. Food prices – particularly of fresh produce – may be impacted by higher costs on seasonal farm labour, while non-food prices will be pushed down by lower demand.

“It is likely that the combination of future economic uncertainty and job losses, whether realised or potential, will drive people to reconsider their spending patterns and to save more.

“As a result, it is vital the Government monitors the situation carefully and is ready to continue taking bold action where necessary to support jobs and businesses.”

Mike Watkins, head of retailer and business insight, Nielsen, added: “The weak demand for many goods and services means non-food retailers continued to battle hard for consumer spending by keeping prices down wherever possible.

“And across supermarkets, the recent upwards pressure on food prices slowed a little in March, with a slowdown in the rate of inflation in both ambient and fresh foods.”