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UK food inflation has reached its highest level in over a year due to dry weather impacting fruit and vegetable harvests, causing prices to rise, as per industry reports.
In June, the annual food inflation rate was 3.7 percent, up from 2.8 percent in May and marking the highest since March 2024, according to the British Retail Consortium.
The warm and dry spring in the UK led to increased fruit and vegetable prices, while meat prices were affected by high wholesale prices and increased labor costs, stated Helen Dickinson, CEO of the BRC.
Farmers have faced challenges with outdoor production due to the extreme weather conditions, impacting the supply chain, noted Nigel Jenney, CEO of the Fresh Produce Consortium.
The UK heavily relies on imports for fresh produce consumption, with 65 percent imported, as per FPC.
Global food prices saw a 6 percent annual increase in May, with dairy prices rising 21 percent and vegetable oil prices up by 19 percent, according to the UN Food and Agriculture Organization index.
Official UK inflation data for June is set to be released on July 16. Data from BRC and inflation reports this year have shown a rise in food prices compared to most of 2024.
The Bank of England anticipates inflation to remain above its 2 percent target for the majority of the year, driven by energy and food prices, although wage growth continues to outpace price increases.
Higher food prices could potentially slow down the rate of interest rate cuts this year, as price growth has a greater impact on household inflation expectations.
Markets predict that the BoE will reduce borrowing costs by 0.25 percent twice in the remaining months of the year from the current 4.25 percent.
Fresh food prices in the UK rose by 3.2 percent annually in June, up from 2.4 percent in May. Ambient food prices, which can be stored at room temperature, increased by 4.3 percent annually in June, up from 3.3 percent in May.
The increase in food prices led to an overall annual rise of 0.4 percent in shop prices in June, compared to a 0.1 percent decline in May. Non-food prices saw an annual decrease of 1.2 percent in June, down from 1.5 percent the previous month.
The BRC’s Dickinson highlighted retailers’ concerns about price hikes for consumers, citing increased employer national insurance contributions and national living wage costs introduced in April, along with geopolitical tensions and the impact of climate change.
“Within three months of the costs imposed by last autumn’s Budget kicking in, headline shop prices have returned to inflation for the first time in close to a year,” she added.
Mike Watkins, head of retailer and business insight at NielsenIQ, which assists in compiling the data, mentioned that rising prices could become worrisome if consumer spending willingness decreases later in the year.
Additional reporting by Madeleine Speed
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