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UK: Retailers accused of charging ‘excessive’ food prices

2/3/11  www.farmersguardian.com

1 March 2011 | By Alistair Driver

UK RETAILERS have been accused of charging ‘excessive’ and ‘unfair’ prices for food and warned that they should be facing a Government investigation.

A report by Swiss bank UBS concludes that UK food prices are rising more rapidly than in most other developed countries and do not reflect the level of cost inflation experienced by retailers.

The report highlights Eurostat figures showing overall UK food inflation is running at 4.9 per cent, compared with a European average of just 1.8 per cent and 1.5 per cent in the US.

The report, which questions whether food will ‘become political’ in the developed OECD nations, notes that all economies have seen an increase in consumer food prices over the last year as significant rises in commodity prices have ‘offset or more than offset’ modest declines in labour costs.

“The UK does, however, stand out as being somewhat anomalous in experiencing significantly more consumer food price inflation than elsewhere,” it claims, highlighting the modest increases in the US and France (1.4 per cent).

“Looking at the perception of food price inflation, along with whether food price inflation is justified by cost pressures, the UK seems most likely to see political agitation over food prices,” UBS analysts say.

“UK food prices are rising more rapidly than most other OECD economies’ food prices, and have significantly outstripped food retailers’ cost inflation. This could allow UK politicians to suggest that food price inflation is ‘unfair’ or ‘excessive’,” the report says.

UBS analysts note that the UK stands out as having the broadest range of food price increases and highlight the 5.1 per cent rise in bread and breakfast cereals prices  as an example of the UK ‘standing out’ as an economy where ‘consumer price inflation is outstripping domestic costs’. The fact that this is not happening in any of the other economies examined is likely to ‘heighten political interest’, the report claims.

“Politicians may well feel justified in asking ‘if everyone faces the same commodity price increases, why does the UK have so much more food inflation?’ It is not whether or not the price increases are justified, it is the fact that the price increases are anomalous that will likely attract political attention,” the report says.

A British Retail Consortium (BRC) spokesman said UK food prices remain relatively low. “What matters is not the rate of change but the absolute level of prices. There is no question that we have lower prices in the UK than almost any other developing country because of our competitive retail market and our efficient supply chain,” he said.

He said the food inflation figures failed to take into account the level of promotion and discounting, such as ‘buy one, get one free’,  in UK stores. “38 per cent of grocery products in the UK are on promotion so these harsh headline figures do not reflect the prices customers are really paying,” he said.

Nonetheless, the BRC’s own figures put food price inflation at 4.6 per cent, up from 4 per cent in December, and only fractionally below the UBS figure.

The spokesman said it would be a ‘nonsense’ to hold a further Government inquiry into retail food prices after three inquiries in recent years conclude that the market was competitive and that consumers were ‘getting a good deal’.

 

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