Shop price inflation easing, say top UK retailers before key meeting with MPs | Inflation

Britain’s biggest retailers have said shop price inflation is easing ahead of a crunch meeting with MPs on Tuesday over the soaring cost of groceries, but warned food prices were continuing to rise at near record rates.

The British Retail Consortium (BRC) said annual inflation in overall shop prices eased to 8.4% in June, down from 9% in May, as retailers cut the price of many staples including milk, cheese and eggs. Clothing and electrical goods prices also fell ahead of the summer holidays.

The retail industry is facing growing pressure over the soaring cost of living, after official figures showed the UK’s annual inflation rate – which takes into account price changes for goods and services across the economy – remained unchanged in April at 8.7%.

Senior executives from Tesco, Sainsbury’s, Asda and Morrisons will be questioned over soaring prices on Tuesday by MPs on the cross-party business and trade committee, with a focus on their profit margins, competition in the supply chain and when shoppers can expect to see a significant fall in prices.

Ministers have explored the option of supermarkets adopting a voluntary price cap for the price of basic food items, but have insisted they would not impose limits on the industry.

Ahead of Tuesday’s hearing with MPs, the BRC said the price of staple goods had helped to bring down its monthly shop price index measure of inflation.

It said fresh food inflation slowed to 15.7% in June, down from 17.2% in May. However, this still means food prices are higher than a year earlier, and are continuing to rise at among the fastest rates on record.

Separate research from the consumer group Which? published on Tuesday suggests soaring grocery prices are worsening the mental health of one in four people across Britain. According to a survey for the consumer watchdog, the rising price of food was also causing a negative impact on sleep, diet and overall physical health.

Sue Davies, the head of food policy at Which?, said MPs on the business and trade committee had to “seize the opportunity to challenge supermarkets to do more to help” struggling households.

“Now is the time to act. The government must urgently get supermarkets to commit to stocking essential budget ranges in all their stores, particularly in areas where people are most in need, as well as make pricing much clearer so shoppers can compare prices and find the best value products.”

Sainsbury’s said on Monday it had made £15m of price cuts to staple own-brand products, including pasta, rice, cornflakes and jam. Supermarkets regularly cut prices on a selection of goods but prices are generally still rising and are likely to be going up elsewhere in stores.

“In the last two years we’ve invested £560m in keeping prices low and more recently we’ve reduced the price of high-volume essentials including bread and butter, milk, tuna and toilet roll,” said Rhian Bartlett, the food and commercial director at Sainsbury’s.

“These latest price cuts will help reassure customers that we will continue to pass on savings as soon as we see the wholesale price of food fall.”

Economists expect food inflation will ease later this year after a sharp drop in global commodity prices, which is taking longer than anticipated by the Bank of England to pass through to consumer prices. The UN’s international food price index has fallen by more than a fifth since hitting a peak in March 2022; underpinned by significant drops in the cost of vegetable oils, cereals and dairy, but partly offset by higher prices for sugar and meat.

However, representatives of Britain’s fresh produce industry have warned that the UK’s post-Brexit border strategy risks further pushing up food prices, because of the extra cost of charges levied for import checks on goods entering the country from the EU and the rest of the world, due to be introduced in the new year.

Despite forecasts for cooling food price inflation, the cost of a weekly shop is still expected to be rising come the end of the year. Helen Dickinson, the chief executive of the BRC, said: “If the current situation continues, food inflation should drop to single digits later this year.”

Mike Watkins, the head of retailer and business insight at NielsenIQ, said: “Whilst prices are still higher than a year ago, the slowdown in food inflation is welcome news for shoppers, helped by supermarkets lowering prices of some staple goods. And if global supply chain costs continue to fall, we may now be past the peak of price increases.”