U.K. grocery CEOs and retail groups warn that Britons’ food costs will increase as retailers face increasing inflation and labor rates.
Food manufacturers and retailers are still evaluating the impact of the 10 percent U.S. tariffs on U.K. goods, but said inflation is a likely result. The U.K. Government has launched a consultation asking U.K. businesses to comment on options, including retaliatory action – and which commodities should have retaliatory tariffs.
Iceland Foods CEO Tarsem Dhaliwal is the latest executive to warn that supermarket prices are likely to increase this year, thanks to higher labor rates grocers are facing from the UK Autumn Budget.
Dhaliwal said he expects food inflation to hike up 4 percent this year, while the British Retail Consortium (BRC) projects inflation will soar 5 percent.
“Retail operates on tight margins and it would be impossible to absorb all GBP 5 billion (USD 7.8 billion, EUR 5.8 billion) of new costs which hit the industry in April,” BRC Director of Insight Kris Hamer said.
The cost of employing people into entry-level jobs surged 10 percent, and the cost of employing people into part-time jobs rose 13 percent, the BRC said.
Those higher business expenses will result in higher prices, fewer jobs, and fewer stores, BRC Chief Executive Helen Dickinson said. In fact, a recent survey of retail finance directors showed that half were planning to reduce hours and workers as a direct result of the Employer’s National Insurance Contributions hike.
The Food and Drink Federation also sounded the alarm over increasing costs, reporting that food and beverage manufacturers’ confidence plunged 47 percent in the fourth quarter, a 41-percentage point decline from the previous quarter.
“As high levels of food and drink inflation continue, the pressure on businesses shows no sign of easing,” FDF Director of Industry Growth and Sustainability Balwinder Dhoot said.
Dhoot said manufacturers are grappling with rising energy and commodities prices, alongside the impact of NICs and the upcoming EPR packaging tax.
“In short, doing business in the U.K. is becoming increasingly expensive,” he said.
Nearly a quarter (22 percent) of the U.K. population is already financially struggling, Kantar said in a recent press release.
“The rising cost of groceries ranks third on the list of concerns keeping consumers awake at night, just behind energy bills and the country’s overall economic outlook,” Kantar Head of Retail and Consumer Insight Fraser McKevitt said.
At the same time, U.K. grocers slashed prices and ramped up promotions in March. Promotional sales reached 28.2 percent of total grocery spending in March, the highest level Kantar has seen in March for four years, McKevitt said.
