Britain’s rising food prices are a political headache  

“PRICES ARE always going up since covid,” says Amy Aron on her way out of Lidl in Hoxton, nodding to a half-filled granny cart. The budget German grocer opened this store in east London in November, and the lunchtime crowd seems glad. Rezaul Karim, a delivery driver shopping with his wife, faults the new shop only for lacking in frozen goods compared with the Iceland it replaced. Still, he says, in the past few years the cost of their bulk shop has gone from £190 ($260) to £275.

Food-and-drink prices have risen by 37% in Britain in the past five years, outstripping most other goods (see chart 1). After sharp increases in 2022-23, fuelled by expensive energy and commodities, prices seemed to stabilise. Then they started climbing again. In the past year food inflation has run at 5.3%, more than in France (1.8%), Germany (2.7%) and Spain (2.8%). There is little sign of a let-up: the Food and Drink Federation, an industry body, reckons it will hit 5.7% in time for Christmas.

This is all bad news for the government. Grocery prices have an uncanny ability to anger voters, who tend to use their weekly shop as an economic barometer. Dread at the checkouts often accompanies a government languishing in the polls. “This is a very big headache in Number 10,” says a Labour adviser. Food also helps explain why overall inflation is stickier in Britain than elsewhere, says James Smith of the Resolution Foundation, a think-tank. That, in turn, is likely to keep interest rates higher for longer, denting the government’s hopes for getting the economy moving.

The topic is notably absent in today’s political debate, which is dominated by immigration. But many voters still say their top concern is the cost of living. Energy bills, which spiked in 2023, have fallen. Food, on which households tend to spend around twice as much, has become the biggest financial concern. “I can’t do a focus group without someone talking about having to put stuff back at the end of a shop,” says Luke Tryl, a pollster. “People just want to know when it’s going to get cheaper.”

The problem is partly relative. Britons got used to their food being cheap. Before 2020, years of low inflation and “supermarket price wars”, as domestic retailers fought fierce competition from Lidl and Aldi, another German discounter, made stability the norm. Throughout the 2010s a pint of milk cost around 44p (a figure politicians still had trouble remembering). Since then it has jumped by 50%—and stayed there. A big pack of Lurpak, a brand of butter, is now £8.25. It is hardly surprising that shoppers think something has gone badly wrong.

Nor is it entirely rational, though. Wages, after all, have risen too. In the past year they have gone up roughly in line with food prices. They have grown fastest for the worst off, thanks to increases in the minimum wage. Food has become more expensive in recent years, but it has become much less affordable only for households at the bottom, which rely on social security. Yet this logic overlooks how most people experience inflation. Almost a fifth of well-off Brits say they are putting back items they deem unreasonably expensive (see chart 2). Studies have found strong links between prices, perceptions of government performance and voting intention.

This may be why politicians like attacking supermarkets. Sir Ed Davey, leader of the Liberal Democrats, has accused them of “profiteering”. Some in Labour want the government to ape the populist stance of Anthony Albanese, the Australian prime minister, who before winning re-election in May accused supermarkets of “taking the piss” by price-gouging customers. In Britain this would make little sense. Its supermarkets are highly competitive. The big chains all have operating margins of 2-4%. Lidl and Aldi have spent years making even lower margins to build market share.

In reality, says Clive Black of Shore Capital, a broker, the government is the main source of the latest burst of inflation. Supermarkets and suppliers are labour-intensive businesses. They are tied into long-term contracts, but an increase in taxes on workers, which came into effect in May, is now being passed on to customers. New product regulations have not helped. Further tax and minimum-wage rises could come in the budget in November.

As consumers remain gloomy, many are cutting back on eating out. That helps explain why, perhaps counter-intuitively, supermarkets’ premium ranges are doing best. Those in Tesco and Sainsbury’s have grown by 15-20% a year for the past two years. “Families who can’t afford that £100 at a pizza restaurant are having something nice at home instead,” says Mr Black. Others are trading down. Mr Karim says his children initially protested against the replacement of their treasured Rice Krispies with an “own brand” cereal, but now that they are older they seem to have forgotten. Voters might not be so kind. ■