Rising Food Prices in the UK Lead to Highest Inflation in Over a Decade

Published 2021년 10월 26일

The effects of Brexit and COVID-19 have resulted in a tidal wave of surging prices for the UK’s food industry as supply chains succumb to increasing pressure. The UK, the world’s fifth-largest economy, is suffering from shortages of truck drivers, butchers, and farmworkers. In October, consumers could witness a 5% increase in supermarket prices, with further increases expected in 2022 as retailers and suppliers continue to pass the rising supply chain costs down to consumers. According to the Office of National Statistics, inflation has risen to 3.2%, the highest in over a decade, with the potential to reach 5% by the end of the year. Vegetable oil prices have surged to a 30-year high, while the price of tomatoes has doubled over the past year. Consumer goods makers such as Nestle, Procter & Gamble, and Unilever have warned of further price hikes.

The Inflation Rate continues to rise

The UK’s inflation rose to 3.2% in August, from 2% in July, the highest monthly increase ever. According to the Office of National Statistics, the 3.2% rate is the highest in close to 10 years, influenced by increasing food and restaurant prices. Before the end of 2021, the inflation rate could rise further, reaching 4.5-5%. According to the Food and Drink Federation, price inflation is currently around 14% and 18% for hospitality firms, with labor shortages and the rising cost of food ingredients having fueled the inflation.

Factors causing the surge in prices

Multiple factors stemming from the effects of Brexit and COVID-19 have led to the surge in food prices. The inflation of food prices in the UK continues as global commodity prices increase, linked to the recovery of trade as COVID-19 eases in regions such as the US and Western Europe, along with production issues caused by a mix of global warming and COVID-19 related shutdowns. Britain is dealing with staff shortages as the flow of workers from the EU, who make up a large proportion of the labor in food processing, has decreased following Brexit.

According to the Food and Drink Federation, which represents food producers, food prices in the UK are forecast to increase by about 5% this autumn. Turkeys and pork products could be in limited supply this Christmas due to the lack of delivery drivers, abattoir staff, and other workers, which has driven up workers’ wages, placing further strain on prices. In the poultry sector, workers’ wages surged by 15%, while the cost of inputs increased by 20%. Wages for HGV truck drivers have also increased, as they remain in short supply, and fuel costs have risen to their highest rate since 2013.

The cost of transporting goods has increased significantly, with firms struggling with global disruptions linked to COVID-19 and Brexit. In recent weeks, the Baltic dry index, measuring the average prices paid for the transportation of dry bulk materials over 20 routes, has risen to a 10-year high. According to the Office for National Statistics, factory input prices increased by 9.9% from January to July due to the rising cost of metals, machinery, wood, energy supplies, and chemicals.

Temporary visas could alleviate worker shortages

The government has introduced temporary visas, allowing workers from the EU to enter the UK for seasonal jobs in the food industry. This could boost food processing and alleviate transportation problems in the short term. The government also hopes that this could trickle down to the consumers, easing the pressure on food prices. Seasonal visas for poultry workers will ensure that Christmas turkeys are ready for the holiday season and 5K temporary visas have also been allocated for truck drivers. Nevertheless, according to the Road Haulage Association (RHA), the temporary visas could have limited impact as there is currently a shortage of 100K truck drivers in the UK.