‘It’s diabolical because if I put my prices up people are going to stop coming to my shop,” says Bally Singh, owner of Hooked Fish and Chips about the hard decisions as high energy and food costs threaten his business.
Singh’s fish and chip shop in West Drayton, in the outer suburbs of London, is one of 10,500 in the UK battling to keep customers happy as the cost of a meal, once as cheap as chips, soars, in grim lockstep with wider UK food prices which are climbing at the fastest rate since 1977.
A fish supper now costs an average of £9 in the UK, up £1.44, or nearly a fifth more, in the past 12 months as shop owners pass on rising costs. In Hooked, a large cod and chips has gone up by £1.25 to £9.50 which is competitive as, in other parts of London, you can expect to pay north of a tenner.
Singh pats the huge frying range that fills the width of the shop. It is gleaming after a recent polish but is a gas guzzler and one of the reasons his energy bill has tripled. That’s just the start: cod is up nearly 80% at £195 a box. Now potatoes are a problem with the price surging nearly 60% as a result of supply issues caused by last summer’s drought.
The squeeze means that some months Singh has not paid himself anything. Some customers grumble about the cost, he says, and these days the shop sells less fish as regulars opt for cheaper items such as a battered sausage or saveloy: “Fish and chips is a British tradition but it’s become expensive when it used to be the cheapest.”
A takeaway or fast-food fix is usually an affordable treat but Office of National Statistics data showed prices up 13% in the year to March. Fish and chips saw the biggest rise, at 19%, but burgers and kebabs were up 17% and 14% respectively. In restaurants, food prices rose 10% but the biggest shock was in the supermarket, where groceries jumped 19%.
For households worn down by a cost of living crisis into its second year it is more bad news. Last year, it was easier to explain price increases. The war in Ukraine had sent already high wholesale gas prices into the stratosphere and caused a food price shock as the supply of important commodities including wheat and sunflower oil was disrupted.
But why are they climbing now? Gas prices are lower than before the war. World food prices are also down sharply, too, according to the Food and Agriculture Organisation. In April, its food index was down 19.7% on 2022.
This mismatch is giving credence to the idea of “greedflation”: companies using inflation as an excuse to increase profit margins. Sharon Graham, the general secretary of Unite, insists the UK is “in the grip of a profiteering crisis”, with the Lib Dems recently calling on the competition authorities toinvestigate.
Indeed, the Bank Of England said last week that its network of agents, which are its eyes and ears around the country, had found falling costs at some companies were “not automatically being passed through to consumer prices in an attempt to rebuild [profit] margins”.
“The truth is that food prices are now driving inflation and causing misery for millions of families and poverty for millions more,” Ed Davey, the Liberal Democrat leader, told the Observer.
“That is why the Competition and Markets Authority has to look into whether supermarkets and food conglomerates are making excessive profits.”
The drumbeat is getting louder and last week MPs on the cross-party Environment, Food and Rural Affairs committee said it would investigate “fairness in food prices”.
However, Justin King, the former chief executive of Sainsbury’s, counters that rather than profiteering, supermarkets were doing the opposite and actually subsidising food prices at the moment.
“They are absorbing some of the inflation they are experiencing and not passing it on,” says King, who now sits on the board of Marks & Spencer. “You can quite clearly see that their margins are stronger on fuel and their overall margins are slightly down and the delta between those two is the margin they make on groceries.”
With some chains giving staff multiple pay rises in the past year, the industry’s wage bill has been rising. “People don’t understand quite how much of their grocery bill is paying labour, whether it be in the shop, in the supply chain, factory or in the fields,” says King who adds there is a “very significant Brexit cost in the shopping basket but it’s very hard to see with everything else that’s going on”.
While no fan of supermarkets, Henry Dimbleby, the government’s former food tsar who in 2021 wrote a wide-ranging review of Britain’s food system (only for it to be largely ignored by the government), says he would be very surprised if they were to blame for high food prices: “The supermarkets have many faults but it is one of the most cut-throat, competitive sectors that I have ever come across. They are obsessed by price signals.”
“We have the cheapest food of anywhere in the world except for America,” continues Dimbleby. “The supermarkets used to have price wars that lasted a month or a few weeks but they have basically been in a price war with Aldi and Lidl for five years.”
Food industry experts say soaring energy costs and the supply chain disruption set off by the invasion of Ukraine are still the main driver of price increases. They list other things, too, including labour, the impact of the climate crisis on harvests and, for the UK, new Brexit trade barriers.
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The good news is that a “lot of the things that were driving inflation at the start of last year, like energy prices, are actually coming down, which will cool inflation in general,” explains James Walton, chief economist at the food industry analyst IGD. However, that was not the case in food markets.
“The reason for that is that food commodity prices remain very, very high,” continues Walton. “At a world level and at a UK level, the cost of your food basics, things like soybeans, coffee, wheat and barley, remain pretty high. It also takes a long time for food cost changes at the top of the supply chain to percolate down to us as consumers.”
Producers and retailers buy and sell using long-term contracts, meaning the price is only adjusted when it ends and is renegotiated, he explains. But while inflation will eventually fall away for shoppers, there will be no turning back the clock, he says.
“In the UK it is not common for food pricing to go backwards,” says Walton. “Food prices rise behind the general cost of living, which means it tends to become cheaper over time, but once a price rise is achieved it tends to stick.”
Economists predict headline inflation will fall rapidly when figures for April are published later this month mainly because the 54% increase in the Ofgem energy price cap in April 2022 will drop out of the annual calculation. And while Rishi Sunak is due to host a “food summit” with supermarket bosses and other industry leaders on Tuesday, the big grocery chains have preempted him by advising ministers that food price inflation has peaked.
That is the view of the British Retail Consortium but its economist, Harvir Dhillon, fears it will be “sticky and persistent”. “Food prices are set to remain high but the annual rate itself, I think we can say with a good deal of confidence, has peaked.” Due to the still high price of some commodities “the pace at which food inflation comes down is going to be a lot slower than perhaps we would like”, he adds.
With actions of the supermarkets under fierce scrutiny – in France, the government has struck a deal with retailers to cap the price of staples – the big stores have been trumpeting recent price cuts. Tesco led the way on milk and others followed, then last week it was Sainsbury’s turn to start the ball rolling with reductions on bread and butter.
While lower prices on food staples were good news, Sue Davies, head of food policy at Which?, said that 10p off a loaf of bread “won’t make a huge difference when the overall price of a weekly shop can be as much as 25% more than it was a year ago in some supermarkets”. With reductions on only a handful of products so far, shoppers are unlikely to feel much benefit, she says. Returning to the example of fish and chips, last year shop owners were clobbered by rocketing fish (the industry had been serving up large quantities of Russian whitefish) and cooking oil prices, as well as the cost of the energy required to fry the food.
Andrew Crook, president of the National Federation of Fish Friers which speaks for the industry, says that apart from potatoes – where the price has gone from £8 to £16 or £17 for a 25kg sack in recent times – things seem to be “holding steady” at the moment.
His day job is running Skippers of Euxton, a fish and chip shop near Chorley in Lancashire. When the minimum wage for adults increased by 92p to £10.42 in April, he put the price of its cod and chips up from £8.75 to £9.50. “The government presents that as putting people’s wages up but, in reality, it comes out of our, and ultimately consumers’, pockets,” he says.
The price of sunflower oil has come down but at £43 for a 20-litre drum (versus £22 before the war) it is “nowhere near what it was”. “I think that’s going to be the same for everything,” he suggests, adding: “It’s the new normal, isn’t it?”
“I’m in an area where it is difficult to charge £9,” he adds. “The perception of the public is that fish and chips should be a cheap meal and that’s difficult because it is not. Fish is an expensive ingredient. People have to go out and risk their lives to catch it. You don’t do that for a pizza.”
