Food inflation hits record high of 18.2% driven by vegetable shortages

The Office for National Statistics (ONS) saw food inflation jump from 16.8% in January to 18.2% last month, with the increase driven by a rise in the cost of vegetables and the continuous high costs of energy-intensive greenhouses.

This is the highest rate since 1977, presenting a threat to consumer confidence and independent retailers across the country.

A perfect storm
Fruit and vegetables such as tomatoes, cucumber and peppers were rationed in UK supermarkets over the past few weeks, due to shortages caused by bad weather conditions in the South of Europe and Northern Africa and many growers having to cut back due to rising costs of heating greenhouses.

This resulted in an annual rate of 18% for vegetables in the year to February 2023, the highest rate since February 2009.

Additionally, bread and cereals, chocolate and confectionery, ready-meals and sauces, as well as hot beverages were each also at the highest rate since at least 2008. In fact, bread was up 20.8%, with pasta products and couscous up 25.3%, eggs rose by 32.5%, margarine and fats up 30.4% and pork up 22.4%.

With prices high across the board, consumer confidence could take a severe hit over the next few weeks – which spells bad news for food retailers. 

As Kevin Bright, partner at McKinsey & Company, explained, “This is eating into a significant proportion of disposable income. A large portion is being driven by those containing grains, eggs, oil and certain proteins.

“Today’s figures mean that many consumers will be further forced to make difficult decisions about what they can put in their baskets, with ever-increasing pressure on the price of fresh food.”

However, he added that in the long-term, “Retailers can explore opportunities to improve productivity, review their relationships and network of suppliers and take an intelligent approach to pricing and promotions.”

The impact on retailers
While independent retailers have been able to avoid shortages due to their agile supply chains and relationships with local growers, and in some cases even saw increased sales, this new data will still have an impact. 

As Tina McKenzie, policy chair at the Federation of Small Businesses (FSB), explained, “Small food outlets and independent food businesses have far less buying power than the big supermarkets, so are generally more exposed to high inflation in food prices. They are as a result more at risk when we see eye-watering levels of inflation, as was the case in February’s figures.

“There’s only so high that prices for consumers can go, even for premium, locally-produced, or specialist food items, with consumer confidence still at a low level amid a continuing cost of living crisis.”

Indeed, The British Independent Retailers Association (BIRA) has said the inflation rate surprise is adding unnecessary pressure to the high street and traders will be hit hard.

Andrew Goodacre, CEO of BIRA, commented, “We are really shocked at this rise and worry for the independents out there who are struggling with rising costs as it is.

“Inflation rising in February is a disappointment and hurts our smaller independent retailers and the high street. Food inflation at 18% (more than double non-food inflation) is a real concern because these higher prices for essential items (as with energy) mean there is much less money for other disposable income expenditures.

“Removing the energy support from businesses before cheaper prices have been implemented will fuel inflation in the future.”

This was also felt by The British Chambers of Commerce which said that February’s shock rise demonstrated that the UK was still in the midst of “a stubborn peak” in inflation. 

The business lobby group’s head of research, David Bharier, explained, “The main drivers of inflation – restaurants and hotels, food, and clothing – confirm the pressure we see on the hospitality and retail sectors. The longer this goes on, the greater the impact on businesses and consumers as much higher prices become the norm.”