Food prices in the UK are rising at their fastest rate on record as the energy crisis and war in Ukraine and labor shortages drive up the cost of living. The cost of fresh food in UK stores rose by 13.3% in October, compared with a year ago, the British Retail Consortium reports this morning. This is the biggest annual increase since at least 2005, when the BRC started collecting the data. Food prices overall rose by a record 11.6%, including a 9.4% increase in staples such as canned food and other less perishable foods. Headline shop price inflation, according to the BRC’s index, accelerated to 6.6% in October from 5.7% – again, the highest on record. Photo: BRC In a blow to struggling families, even essentials like tea bags, milk and sugar have become much more expensive. Helen Dickinson OBE, chief executive of the BRC, says October has been a difficult month for consumers – who also saw their energy bills rise as the price cap increased. Stores are also paying higher wages to attract and retain staff, with some supermarkets increasing wages two or three times in the last year. And there are tough times ahead, warns Dickinson: Prices rose due to significant input cost pressures facing retailers due to rising commodity and energy prices and a tight labor market. Even the price of essentials rose, with the price of the humble cup increasing, as tea bags, milk and sugar saw significant increases. While some supply chain costs are starting to come down, this is more than offset by energy costs, meaning a tough time for retailers and households. Dickinson adds that it will be difficult for retailers not to raise prices again in the run-up to Christmas and is urging ministers to help the industry by freezing business rates. Last month’s official inflation report for September also showed rising food prices pushing up costs.
Also coming today
Finance Committee MPs are holding a meeting exploring the current state of the mortgage market, looking at what support is in place for vulnerable customers struggling with rising interest rates and the cost of living. We’ll also be watching Britishvolt, the struggling UK battery start-up, which is trying to raise fresh funding from investors to avoid administration. Manufacturing data from across the eurozone and trade data from Germany may show whether Europe has edged closer to recession. Investors are bracing for the US Federal Reserve to agree to another big rate hike today. The Fed is expected to raise its benchmark interest rate by another three-quarters of a percent… but will it give any indication that the tightening cycle may be easing soon?
THE AGENDA
7 am BST: German trade data for September 9 a.m. BST: Eurozone manufacturing PMI reports for October 11 a.m. BST: Weekly US Mortgage Applications 12.15 p.m. BST: ADP survey of US private sector payrolls 2.15 p.m. BST: UK Finance Committee to hold hearing on UK mortgage market 6 p.m. BST: Federal Reserve Interest Rate Decision
Updated at 07:19 GMT Important events
The government is testing emergency blackout plans as supply fears grow
Britons could face long power cuts this winter, as well as rising shop prices. The government has “war-gamed” contingency plans to deal with blackouts lasting up to seven days in the event of a national blackout amid growing fears about security of supply this winter. My colleagues Pippa Crerar and Alex Lawson report: The Guardian has seen documents marked “officially sensitive”, which warn that in a “reasonable worst-case scenario” all sectors, including transport, food and water supplies, communications and energy could be “severely disrupted”. for up to a week. They show ministers will prioritize providing food, water and shelter to the young and the elderly, as well as those with caring responsibilities, if the country faces blackouts, with the Met Office warning Britain faces a greater risk of a cold winter . Whitehall officials are currently trialling Program Yarrow, the confidential blackout response plan, and have held a series of exercises with government departments and councils across the country in recent days. Here’s the full story: A Next store in London. Photo: Ian West/PA High Street chain Next says its sales were slightly higher than expected in the last quarter, despite pressure on customers. Next told the City that full-price sales rose 0.4% in the 13 weeks to 29 October. It was helped by cooler weather in early September, which encouraged customers to buy autumn clothes. The next one says: Full price sales over the past five weeks were up +1.4%, boosted by a particularly strong week in late September when temperatures dropped and sales of heavier weight products improved. The next is to stick to its full-year guidance after cutting its earnings forecast in September. Next – “13 weeks to 29 October full price sales increased +0.4%2 compared to last year…slightly above our expectations…maintaining our guidance for full year pre-tax profit in £840m, up +2.1% on last year…Earnings per share of 554.5p will be up +4.5% on last year” pic.twitter.com/bHZ8nNzv5A — Chris Bailey (@Financial_Orbit) November 2, 2022
It’s going to be a tough winter
There is no hope that food price inflation will ease soon, warns Andy Clarke, former chief executive of supermarket chain Asda. Clarke, now the chairman of operational improvement specialist Newton Europe, told Radio 4’s Today Program that we are facing a difficult winter. With food inflation already at 11.6%, according to today’s BRC survey, Clarke warns it could accelerate higher. He says: We are seeing inflation numbers in the double digits. There is nothing we can see in the short term to suggest it will go south from that. If nothing else, it will go up. Clarke adds that Christmas will be difficult for families, who are already dealing with high fuel costs and rising energy bills. Everyone wants to enjoy Christmas, but you have to take the view that certainly for the next three to six months we are not going to see a rapid fall in inflation…. I think it’s going to be a tough winter and food inflation is clearly taking a toll on families. Rising prices are already discouraging consumers from spending on non-essential items, sending shockwaves through retailers. As Bloomberg points out: Fast fashion chain Boohoo Group Plc and high street bellwether Next Plc issued profit warnings in September, while Asos Plc is restructuring its business. Online furniture retailer Made.com Group Plc is set to enter bankruptcy due to weaker demand and supply chain difficulties. Supermarkets need to offer good value this Christmas to win business from cash-strapped customers, adds Mike Watkins, Head of Retail and Business Insight at NielsenIQ. “External factors are keeping store price inflation at record high levels and challenging economic conditions are weighing heavily on consumer confidence and retail spending. With pressure to increase discretionary spend for both non-food and food retail, offering good value is the table stakes in the battle for shopper loyalty over the next 8 weeks.” Updated at 07.03 GMT
Introduction: Food prices are rising at the fastest rate on record
Good morning and welcome to our rolling coverage of business, financial markets and the global economy. Food prices in the UK are rising at their fastest rate on record as the energy crisis and war in Ukraine and labor shortages drive up the cost of living. The cost of fresh food in UK stores rose by 13.3% in October, compared with a year ago, the British Retail Consortium reports this morning. This is the biggest annual increase since at least 2005, when the BRC started collecting the data. Food prices overall rose by a record 11.6%, including a 9.4% increase in staples such as canned food and other less perishable foods. Headline shop price inflation, according to the BRC’s index, accelerated to 6.6% in October from 5.7% – again, the highest on record. Photo: BRC In a blow to struggling families, even essentials like tea bags, milk and sugar have become much more expensive. Helen Dickinson OBE, chief executive of the BRC, says October has been a difficult month for consumers – who also saw their energy bills rise as the price cap increased. Stores are also paying higher wages to attract and retain staff, with some supermarkets increasing wages two or three times in the last year. And there are tough times ahead, warns Dickinson: Prices rose due to significant input cost pressures facing retailers due to rising commodity and energy prices and a tight labor market. Even the price of essentials rose, with the price of the humble cup increasing, as tea bags, milk and sugar saw significant increases. While some supply chain costs are starting to come down, this is more than offset by energy costs, meaning a tough time for retailers and households. Dickinson adds that it will be difficult for retailers not to raise prices again in the run-up to Christmas and is urging ministers to help the industry by freezing business rates. Last month’s official inflation report for September also showed rising food prices pushing up costs.
Also coming today
Finance Committee MPs are holding a meeting exploring the current state of the mortgage market, looking at what support is in place for vulnerable customers struggling with rising interest rates and the cost of living. We’ll also be watching Britishvolt, the struggling UK battery start-up, which is trying to raise fresh funding from investors to avoid falling…
