Government urged to halt food inflation ‘before it’s too late’
The food industry’s leading trade body has urged the government to act on food inflation before it’s “too late” to protect consumers and businesses.
The Food and Drink Federation (FDF) expects food inflation to soar from three to between nine and 10 per cent this year, and has accused the government of lacking “urgency” to support the food industry.
The blockage of the Strait of Hormuz during the Iran war has sent supply chain, fertiliser and energy costs soaring and the FDF believes these pressures will filter into prices in the coming months.
The trade body’s nine-to-10 per cent inflation forecast was based on the assumption that the effective blockade on the Strait of Hormuz would be lifted by this week.
Given that the US has blockaded the trade route amid fragile ceasefire negotiations, the FDF signalled on Tuesday that inflation could be even worse than the figure forecast.
Government must act ‘urgently’
Karen Betts, the FDF’s chief executive, called on the government to act with “urgency” to protect consumers from climbing prices and to prevent food manufacturers from going under.
She said on Tuesday: “We’re saying to government: ‘If you want to help us stall food inflation, there are things you can do to help the industry right across the board on energy, but you need to act quickly’.
“If we don’t get that [support] in as inflation starts to build, then it’s going to be too late. It will have started to work its way through the system and, ultimately, into prices.”
Betts said the government is “listening” to food manufacturers but that she is “concerned” by its “lack of urgency”.
The FDF, which represents the UK’s 12,000 food and drink manufacturers, is calling on the Treasury to offer tax relief to the most energy intensive foods, like sugar, baked goods and coffee.
The government extended its British Industrial Competitiveness Scheme (BICS) to cut energy bills for some food manufacturers, but Betts said she does not think the Treasury will extend this further.
She said the government should consider stalling some of the regulatory costs which face food manufacturers, including a move to re-align some of the UK’s food standards with those of the EU.
Betts said: “We’ve got this wave of new regulation coming at us, and if the government wants the industry to strain every sinew to take the heat out of inflation, it’s just not going to be possible to do all these other things in the time frame that is envisaged.”
UK firms in ‘worse position’ than 2022 crisis
Last week, Tesco boss Ken Murphy said he “does not recognise” the FDF’s double-digit food inflation warning.
Responding to Murphy’s comments, Betts said costs that may already be impacting manufacturers will take longer to hit supermarket shelves.
“It is a very competitive market and some of that will have been signalling to manufacturers that they will need to evidence their cost pricings.
“All of our companies will expect to have a very detailed conversation with retailers about any costs that they want to pass on,” she said.
The Federation’s chief economist, Liliana Danila, suggested British households and food manufacturers are in a far worse position to deal with this energy crisis than that caused by the Ukraine war in 2022.
Household finances were “already strained” before the US-Israeli attacks on Iran, Danila said, and the impact on the food industry comes after six “difficult years” in which the sector has struggled to bounce back from Brexit, Covid-19 pandemic, and the Ukraine war.
Food inflation stood at 3.3 per cent in February, and the Office of National Statistics will reveal on Wednesday whether food prices have already been spiked by the conflict.