Food prices in the UK jumped 7% a year due to higher fuel prices, rising transportation costs, increasing import prices and most importantly, rising inflation.
The British Retail Consortium (BRC) and pollsters Nielsen said that the inflation in high street stores of the UK rose in July 2008, as reported by Forbes.
BRC in its monthly index revealed that shop prices surged by 3.2% in July 2008 against 2.5% in June 2008. The rise in shop prices was driven by a huge jump of 9.5% in food prices compared to the same month a year ago and 7% against June 2008. Besides, non-food prices also grew by 0.1% annually while it gained 0.2% in June 2008. The cost of ambient food, which could be stored for long period without refrigeration, flared by 7.4% while the prices of fresh food witnessed 10.8% annual rise in July 2008.
The outburst in food prices in the UK is mainly contributed by rising inflation which climbed up due to higher fuel prices. Rising fuel prices are making transportation of products costlier which is indirectly increasing the production and distribution cost. Hence, the food products companies hiked the prices to reduce their losses. Besides, the commodity prices have gone up due to which the production costs shoot up and ultimately, the food product prices surged.
Another important reason for rise in food prices is soaring import costs due to depreciation in pound. Hence, the retailers hiked the food prices to cover up additional money they are paying because of higher import costs.
However, the industry experts said that food prices might move up further in coming months because inflation is continuously rising. This will have a negative impact on lending by the banks, as they will have to keep the interest rates on hold to tame inflation.
A Research Analyst at RNCOS said, “Food prices in the UK have tremendously increased due to various reasons such as high import cost and inflation. Hike in food prices has badly hit the food industry and now the whole responsibility of bringing the industry back on track is on retailers. They should cut the cost and boost sales to prevent the industry from suffering further.”
Related Market Research Reports:
Indian Food and Drinks Market: Emerging Opportunities
US Wine Market Forecast to 2012
UK Health Drinks Market
