1. Food inflation in the UK

The consumer price index, which indicates the inflationary pressures on various goods and services, rose by 9.2% in the 12 months to December 2022. The Office for National Statistics (ONS) reported that the largest contributing factors to this inflation were rising domestic energy prices and food price inflation. For example, food and non-alcoholic beverages rose by 16.9% over the period in question. This was the highest rise in any of the different components of consumer price inflation.

Looking in more detail at food and drink price inflation reveals the following:

  • While overall inflation had begun to fall during the last two months of 2022, the inflation rate for food and non-alcoholic beverages had continued to grow.
  • Food prices had risen consistently for the 17 months up to December 2022.
  • In December 2022, food price inflation was at its highest since September 1977 when, according to ONS estimates, the rate was 17.6%.
  • Prices for low-fat milk increased the most, rising by 46% between December 2021 and December 2022.

In a separate analysis of food price inflation published in December 2022, the ONS noted that price rises were particularly severe for some of the lowest-cost household essentials like pasta, tea and bread. The ONS noted that the kinds of food price inflation the UK had experienced over the past year had the worst effect on the most vulnerable in society, with rising prices having a greater impact on those on lower incomes. It said 61% of those in the most deprived areas of the UK were buying less food compared with the previous year, as opposed to 44% in the least deprived areas.

The Bank of England has said it predicts UK inflation figures should fall in the middle of 2023. This is based on the expectation that the UK government’s financial support for households and businesses would help to reduce energy costs. It also said some of the production difficulties following the Covid-19 pandemic were expected to ease, reducing the prices of imported goods. Finally, it said it expected there to be less demand for goods and services in the UK.

However, although overall inflation is expected to fall in 2023, the government has said food price inflation is expected to remain high in the short term. In January 2023, the British Retail Consortium reported food price inflation rose to 13.3% in December, compared to 12.4% the previous month. It said this was the highest rate of inflation in this category since it started tracking this data in 2005. The chief executive of the British Retail Consortium, Helen Dickinson, also shared ministers’ concerns that high levels of food price inflation were likely to continue in 2023, arguing that there were no signs of inflationary pressure waning. The Food and Drink Federation has also described the medium-term outlook for the UK food industry as “worrying”, noting that rising prices and eroding household incomes had reduced demand.

Chart 1: Percentage increases in food prices from December 2021 to December 2022

Chart 1: Percentage increase in food prices from December 2021 to December 2022

2. Food insecurity and food bank use

The rising cost of food has resulted in more people relying on food banks. In February 2022, the Food Foundation reported that 8.8% of UK households had experienced food insecurity in the previous month. The Food Foundation said this had increased from 7.3% in July 2021. The Trussell Trust has also reported that over 2.1mn food parcels were distributed to people by food banks in 2021/22. This was lower than the total number distributed in 2020/21 during the pandemic (2.5mn). However, the Trussell Trust noted that the 2021/22 figure was 14% higher than in 2019/20.

In addition, the Trussell Trust has said 40% of people who receive universal credit had visited a food bank at least once during August 2022. This is based on an online poll conducted on behalf of the Trussell Trust by YouGov. More recent figures from the Trussell Trust, covering the six months up to September 2022, indicated 320,000 people had used foodbanks for the first time. This represented a 40% increase in new food bank users when compared to 2021.

3. Global food inflation

2022 saw a rise in food prices not just in the UK but around the world. Although recent figures from the UN Food and Agriculture Organization (FAO) indicate a decline in global food prices since mid-2022, over the year as a whole food prices were on average 14.3 percent higher than the previous year.

One major factor behind high levels of food price inflation is the rising cost of energy. Energy prices in Europe have risen sharply in 2022 as a result of the ongoing Russian invasion of Ukraine. The rising cost of energy has affected not only the cost of food production and storage but also the cost to transport food.

Another factor leading to food price inflation is the impact of the conflict on food exports from both Russia and Ukraine. In June 2022, the FAO noted the significance of Russia and Ukraine to global food production, describing them as among the most important producers of agricultural commodities in the world. In 2021, it noted that both Russia and Ukraine ranked among the top three global exporters of wheat, barley, maize, rapeseed and rapeseed oil, sunflower seed and sunflower oil. It also noted that Russia ranked as the world’s top exporter of nitrogen fertilizers, the second leading supplier of potassic fertilizers and the third largest exporter of phosphorous fertilizers. The impact of the conflict has affected countries differently depending on the degree to which they have been reliant on food imports from Russia and Ukraine. For example, the FAO noted that certain countries in the Horn of Africa, such as Eritrea and Somalia, were highly dependent on imports from these countries for supplies of wheat.

In August 2022, the blockade by Russia of Ukrainian ports was eased following a deal brokered by the United Nations, with some grain shipments able to leave Ukrainian ports. In October 2022, Russia said it would end its participation in this deal and reimpose the blockade. However, at the time of writing, the deal brokered by the United Nations has remained in force.

A further factor is climate change. Countries around the world, including China, the United States and countries in Europe, have suffered droughts in 2022. Both the UK government and international bodies, such as the Intergovernmental Panel on Climate Change, have identified climate change and biodiversity loss as major contributing factors to food insecurity in the UK and around the world. In 2022, record high temperatures led to an early harvest and a high crop yield for farmers in the UK. The impact of the droughts was also less severe than previously expected. However, the Agriculture and Horticulture Development Board has warned that weather extremes resulting from climate change remain a risk to UK farming in the longer term.

4. UK government response

The chancellor of the exchequer, Jeremy Hunt, has said one of his three priorities for the UK economy is to address inflationary pressures. He said the government would do this by improving the UK’s economic stability by balancing the budget while providing support to the economy in the medium term. Mr Hunt has said this included providing support to households to help with the cost of living crisis. The government has also said that, while food prices are set individually by businesses, it was working with food retailers and producers to support the availability of affordably priced food. The shadow environment, food and rural affairs minister, Daniel Zeichner, has criticised the government’s response to rising food prices, arguing it should do more to improve food security and accusing ministers of being “asleep at the wheel”. Mr Zeichner called on the government to give greater powers to regulators, such as the Groceries Code Adjudicator, to intervene in the market.

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Cover image by Freepik.