Supermarkets could face food price inquiry

UK supermarkets are raising prices higher than inflation, risking a government inquiry, investment bank UBS has warned.


Food inflation in the UK was at an annual rate of 4.6% in February, its highest level for 18 months, markedly higher than the Eurozone average of 1.8% and the US average of 1.5%, according to a new UBS report.

The sharp rise contributed to the overall UK inflation rate increase to 4% earlier this month, twice the Bank of England’s target.

The sharp rises in commodity prices over the past year would justify a 3-5% increase in processed food prices, but some supermarkets have raised prices by 6-6.5%.

UBS suggests that supermarkets may be increasing profit margins from food sales, which could trigger a competition inquiry.

Co-writer of the report Paul Donovan says: “Prices are rising in excess of justifiable cost increases.”

Retailers say poor weather and a weak pound has pushed up food import costs but UBS says the “scale” of inflation has made Britain the most vulnerable to political intervention.

The report also adds that only 20-25% of the final processed food price reflects “commodity input”, with most of the cost consisting of packaging, labour, marketing and distribution.

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