Why is food getting more expensive?

Food prices in the UK are seeing their highest levels of inflation in decades, with the Office for National Statistics (ONS) announcing that the consumer price index (CPI) inflation reached 5.5% in January of this year.

This comes alongside massive jumps in energy bills and the cost of living, leading many to fear how they will make ends meet.

What has risen? 

The ONS reports that prices of all categories of food and drink have risen from what they were last year, as demonstrated below:

Which? also found that UK supermarkets were, on average, charging up to 9% more for their ranges in December 2021 than they were in January of the same year.

This increase is further backed up by data analyst firm, Kantar, whose findings suggest that the average pre-Christmas shop went up by some £15 in the four weeks leading up to Christmas 2021.

What has caused the rise? 

The rise in food costs is certainly a multifaceted problem, but it can largely be attributed to the pandemic and its effect on policy surrounding Brexit’s fallout.

Supply chain issues have plagued almost every industry since the start of the pandemic for a multitude of reasons. Workers have been sick, resigned, or retired, leaving large gaps in the supply chain that still haven’t been properly plugged. Increased caution over imports – owing to fears of COVID transmission – have also slowed down the process, thereby limiting the supply.

Further trade-based implications, resulting largely from Brexit, also complicate the matter. This has made certain products more expensive to import, with prices usually being passed on to the consumer.

What does the future look like?

It is unlikely that the aforementioned issues will be going away any time soon. Labour shortages and import policy negotiations, for example, are massively complex problems which require lengthy solutions.

The Bank of England is now predicting inflation will reach 7% by April 2022, taking it to its highest level since 1991. On top of this, many manufacturers, wholesalers, and supermarkets continue to reiterate they expect to see price increases for the foreseeable future.

On top of this, pay rises are not keeping in line with inflation. Standard pay – which excludes bonuses and is adjusted for inflation – fell by 1% on November 2021 compared to the same month in 2020. In a recent BBC article, the ONS had the following to say:

‘Salaries are growing reasonably strongly, but some people are saying they are not feeling much better due to rising prices.’

Final Thoughts

While this does all seem very doom and gloom, it is important to remember that we have made it through every major financial downturn thus far – often stronger than ever.

While the root causes of price inflation may take a while to dissolve, prices should stabilise over time as the world adjusts to the new normal.

What could be a better time to value your business than now? Polestar has real-life experience navigating times of financial upheaval and would be delighted to chat – feel free to contact us or reach out for a business valuation by clicking the following link:

UK inflation rose to the highest level for three decades in January, with the price of everyday food continuing to increase.

By Rebecca Garland on 16/02/2022