Retail bosses and his own cabinet members have expressed concerns over Prime Minister Rishi Sunak’s proposal to cap food prices.
They argue that such a plan would not alleviate food price inflation and could potentially lead to shortages. Cabinet ministers, speaking to the Telegraph, stated that implementing price caps reminiscent of those seen in the 1970s would not be effective in the present day.
Go deeper with GlobalData
Price caps would have minimal impact on food price inflation, says the BRC
The British Retail Consortium (BRC) has strongly criticised the proposed plan, with the support of the chairs of major supermarket chains such as Tesco, Sainsbury’s, Morrisons and Waitrose.
The BRC emphasised that these price caps would make “one jot of difference” to the ongoing food price inflation, which currently stands above 19.9%. One retail chief labelled the plan as “hare-brained,” suggesting that the government should address the root causes of food inflation instead.
On the other hand, Downing Street has clarified that any proposals for price caps would be optional for UK supermarkets, emphasising that they would not be mandatory.
Aides within Downing Street are drafting policies similar to those implemented in France, where supermarkets charge the “lowest possible amount” for basic food items.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataDespite the recent decrease in overall inflation to single digits, food inflation remains a matter of concern, approaching a record high at 19.1%.
Treasury sources taken aback by challenges in reducing food inflation
Treasury sources expressed surprise at the resilience and difficulty in reducing food inflation, which hindered the government’s expectations of a faster decline in inflation.
This challenges Rishi Sunak’s plans for tax cuts before the next election, as a lack of economic growth could impede funding for such initiatives.
Commenting on the latest inflation figures, Chancellor Jeremy Hunt acknowledged that while inflation had decreased to single digits, food prices were still rising at an alarming rate.
Hunt stressed the importance of sticking to the plan to combat inflation, mentioning the possibility of accepting a recession if it meant reducing inflation.
Proposed price caps on basic food items slammed as “anti-market”
However, concerns have been raised regarding the proposed price caps on basic food items, with some fearing they may be “anti-market.”
A source noted that although retailers might appear to make substantial profits, their margins are often tight and it is crucial to consider the complexities of their operations.
The Office for National Statistics (ONS) reported that the overall inflation rate fell to 8.7%, mainly driven by stable gas and electricity costs in April.
It is the first time the Consumer Price Index (CPI) has dropped below 10% in the past eight months. Nevertheless, food prices continue to surge, although some staple products like bread and milk experience slightly slower increases.
Over the past year, granulated sugar prices have risen by 47% to an average of £1.08 while cheddar cheese prices have soared by 39% to £3.77.
Additionally, the cost of a dozen eggs has increased by 37% (£3.29), two pints of milk has risen by 33% (£1.30), sliced white bread has seen a 28% increase (£1.39) and whole chickens have experienced a 23% rise (£3.79 per kilogram).
