The chairman of the British supermarket chain Tesco has declared that food prices are set to rise even further, according to a report by the BBC.
John Allan, the boss of Tesco, warned that the ‘’worst is yet to come’’ in terms of price increases and stated that he was troubled by the fact that many households will face a choice between heating or eating.
A report earlier this month by the British Retail Consortium states that food inflation rose to 2.7% in January, an increase of 0.3% from December of the previous year.
Allan estimated that prices in supermarkets could climb as much as 5% by spring of this year. This is largely due to factors including labour force shortages, rising energy prices and various other supply-side bottlenecks. He also predicted that household spending on food could rise from 9% of total household income to around 15% by spring due to rising inflation rates, creating a cost of living squeeze that would hit the ‘’hardest-up still harder’’.
Despite Allan’s concerns over rising food inflation, there is little to be done by the industry in order to protect consumers. The chief executive of the British Retail Consortium, Helen Dickinson, said ‘’It would be impossible to protect consumers from any future rises. As commodity prices, energy prices and transportation costs continue to rise, it is inevitable that retail prices will continue to follow in the future.’’
The increase in the price of food combined with an increase in the energy price cap level (which is predicted to increase the average annual UK energy bill by around 50% to £2000 when it is raised in April) will no doubt push many into poverty and make life even more difficult for low-income households who already struggle to pay their rent, put food on the table and pay their heating bills.
In 2020 (prior to the inflation crisis) the Trussell Trust (a charity which aims to end UK hunger and poverty) had to release 2.5 million emergency food parcels as families struggled to feed themselves during the initial lockdown periods. It is likely that requests for emergency food parcels will soar in coming months.
As inflation continues to rise and fiscal support is retracted, families are likely to have to cut back on expenditure as their disposable incomes decline. Households may have to switch to purchasing inferior goods, live off credit or savings or rely on charities including food banks.
Alternatively, households could demand higher wages from employers, citing rising prices as sufficient grounds for a pay increase. However, this option is being actively discouraged by the Bank of England.
In an interview with the BBC, the governor of the Bank, Andrew Bailey, suggested that workers should not ask for big pay increases in order to prevent further price increases.
If wages are increased, costs of production for firms will rise, feeding through to even higher prices for consumers.
However, the Treasury and Downing Street have decided not to endorse Bailey’s comments and the head of economics at the Trade Union Congress, Kate Bell said that not increasing pay would "make the squeeze on family budgets even tighter".
Asked if the company would be telling employees to follow Mr Bailey's advice, Mr Allan said "no, absolutely not. I think that's the wrong direction for people to go in," he said. "We are not telling people not to take a pay rise. We think our colleagues deserve pay rises."
Written by Deandra Peiris