Record 13.3% UK food inflation raises fears of ‘another difficult year’

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UK food price rises soared to a record rate in December, figures show, as retail industry bosses warned that high inflation would continue in 2023 amid the fallout from surging energy bills.

Annual food inflation jumped to 13.3% in December, up from 12.4% in November, according to the latest monthly report from trade body the British Retail Consortium (BRC) and the data firm Nielsen. The BRC said this was the highest monthly rate since it began collecting data in 2005.

Highlighting the pressure on households during the festive shopping season, the industry snapshot showed the price of many essential foods rose sharply as the reverberations from Russia’s war in Ukraine continued to drive up energy costs.

The BRC said high prices for animal feed, fertiliser and energy fed into higher food prices on supermarket shelves, while warning that consumers would probably face further increases in 2023.

“It was a challenging Christmas for many households across the UK,” said the BRC’s chief executive, Helen Dickinson. “2023 will be another difficult year for consumers and businesses as inflation shows no immediate signs of waning.”

The figures came as concerns grew about the strength of the British economy, with the headline inflation rate at its highest level since the early 1980s, driven by soaring gas and electricity bills. Manufacturers suffered a further downturn in activity in December, with production, new orders and employment all in decline.

The S&P Global/Cips UK manufacturing purchasing managers’ Index fell to a 31-month low of 45.3 in December, down from 46.5 in November, indicating a fifth successive month of contraction in UK factory output.

Domestic and overseas demand remained lacklustre as the industry suffered a weak end to 2022, with companies facing rising costs, increasing market volatility and problems related to Brexit for firms with EU-based customers.

John Glen, the chief economist at the Chartered Institute of Procurement and Supply, said: “New orders dropped at one of the fastest rates in over a decade as overseas customers were put off by Brexit customs requirements pushing up costs and delays and domestic orders were affected by the general pressure from rising prices.”

As the soaring costs fed through to consumers, households sharply cut back on spending in recent months. Figures from Barclaycard show retail sales fell overall in 2022, while high street footfall slumped last week at a time when consumers would usually be hitting the shops for the Boxing Day sales.

According to the BRC figures for December, when households usually stock up on Christmas food and drink, the inflation rate for fresh produce accelerated to a new record of 15% in December, up from 14.3% a month earlier.

However, retailers offering steep discounts on non-food products helped to bring December’s overall shop price inflation figure down a little, to 7.3% from 7.4% the month before, as high street stores and online retailers looked to shed excess stock built up during periods of disruption to supply chains earlier in 2022.

Aldi said it had experienced record Christmas sales as more shoppers turned to the discount chain amid the cost of living crisis. The retailer said sales jumped by 26% in December to top ?1.4bn in the UK and Ireland for the first time.

The discounter highlighted strong sales of fresh meat products, with poultry and pork up 28% for the month. Chilled dessert sales rose by 30%, while sales of cheese increased by about 50%. Snacks such as crisps and nuts were up more than 40% as the World Cup coincided with the Christmas period for the first time.

Dickinson said businesses struggling with soaring energy costs urgently required support from the government. The chancellor, Jeremy Hunt, confirmed in the run-up to Christmas that he was preparing an extension in financial support for businesses with high energy bills, which would be announced “early in the new year”.

“Without the scheme, retailers could see their energy bills rise by ?7.5bn,” Dickinson said. “The government must urgently provide clarity on what future support might look like, or else consumers might pay the price.”