Supermarket bosses blame meddling ministers who imposed “eye watering” costs to the industry for contributing towards a rise in food prices.
John Glen, the chief secretary of the Treasury, was informed by senior directors from Britain’s largest grocers that the cost of the weekly shop is increasing due to onerous regulations covering everything from border checks to recycling.
Supermarket executives told the Treasury that the food inflation rate was “past its peak” and that prices would start to drop in the next few months. This is despite the Bank of England warning that the rises will continue until the end of 2023.
In a virtual meeting, the Bank had asked the bosses to explain the rising price after it said the cost of the weekly shop was the cause of the stubbornly high inflation.
Mr Glen asked officials to discuss drivers of food inflation, and ways to reduce costs amid allegations about the profiteering industry.
Grocery directors, however, blamed government policies as a barrier to efforts to control prices. One director described the additional costs as “eye watering”.
The policies include border checks and Scotland’s bottle recycling scheme. There are plans to implement a similar program for the rest the UK, as well as new labelling regulations for Northern Ireland.
As part of an agreement reached earlier this year between Prime Minister Rishi Sunderak and the Northern Ireland Government, “Not for EU’ labels will be gradually introduced on all meats and dairy products. The government has been criticized for not providing enough details about this program.
Directors called on Whitehall do more to address labour shortages. For example, by extending seasonal workers schemes to lower their costs.
They dismissed criticisms that the drops in commodity prices, such as wheat, should have already been reflected on shelves. They claimed that there was a delay.
The Bank blamed “almost” all of the high inflation in the last few months on the rising costs of food and other items.
The Bank is confident that food prices, which have already risen at the fastest rate in 45 years, are set to continue rising throughout the remainder of the year.
Threadneedle street’s latest economic forecast stated: “Food inflation is expected to decline more slowly than originally anticipated.”
The current projection of food inflation for the UK near term does not include a reduction in average food prices. Only a slower rate of inflation is included.
Andrew Bailey, the Bank Governor, tried to reassure the public that the peak of inflation has already passed. However he did not know when the price of a typical weekly shop would drop.
He said: “Energy costs have dropped from their peak, and this will start to show up as lower inflation.
We are less certain about the timing, but we do expect that food prices will also begin to fall.
Mr Bailey stated that despite the rising cost of food, he does not believe supermarkets or other grocery stores are profiteering.
He told the BBC: “It doesn’t seem like this is happening.”
Last month, the Office for National Statistics said that it expected to see global food prices falling reflected in supermarkets. “But we’re still not there yet.”
The chief executives of supermarkets and food companies have become increasingly frustrated by the accusations that they do not lower prices quickly enough. Unilever’s chief executive, who is also the maker of Magnum Marmite, rebuffed the allegations angrily earlier this month.
Alan Jope said in a heated press conference: “I’m sorry, I know this is an uncomfortable truth, but there has been no profiteering of any kind, shape or form.”
Sainsburys also denied claims that it kept prices higher than needed. Simon Roberts, the chief executive of Britain’s second-largest supermarket, said earlier this month that Sainsburys was doing “all it can” to curb inflation.
The major supermarkets have reduced the prices of milk, butter, and bread in response to the lower wholesale dairy and wheat prices. However, the costs at checkout are still typically significantly higher than before the Ukraine war.
The Treasury stated that it “listened to views from the sector regarding the drivers of food price inflation and agreed to continue engaging with senior government officials on this issue and the impact on consumers”.
Helen Dickinson of the British Retail Consortium said that the meeting was very constructive.