The cost of living crisis continues to dominate headlines whilst simultaneously making life increasingly difficult for many in the UK. This includes 4 million children belonging to families struggling with food poverty, a demographic that has doubled in the last year. More broadly, around half of all Brits are buying less food these days. This is of little surprise when you consider that the annual inflation rate for food reached 19.2% as of March 2023: the highest rate recorded for 45 years!
Even for those whose consumption hasn’t changed, the selection of items going in the basket may well be different these days. Some shoppers are looking out more for deals and others have changed their buying habits. But which foods has inflation hit the most?
In March 2021, Money Tips Blog recorded the prices of items from a typical UK shopping basket, as listed on the website of a popular UK supermarket. We recently went through the same exercise to understand the extent to which this same shopping basket of goods has gone up in price in the last two years.
The results were a little surprising. For example, one might expect that the food group that has gone up in price the most to be meat. However, meat only ranked 4th: increasing by 30% on average since 2021. As for the category of food that has experienced the greatest price hikes? Well that would be fats and oils, which have increased on average by a whopping 86% in just two years. Indeed, the single product that has gone up in price the most proved to be olive oil, a bottle of which now costing £3.50 more than it did two years ago: that’s a 149% increase!
The interactive data visualisation at the bottom of this article provides more insight into our study.
Why have food prices gone up by so much?
It would appear there are a combination of factors that sit behind such a dramatic increase in food costs. Perhaps most notable is the ongoing war in Ukraine, a country sometimes referred to as the breadbasket of Europe. This has undoubtedly borne on the supply chain of certain foods across the continent. Parts of Europe have also experienced poor weather, which has resulted in poor yield of crops.
Closer to home, Brexit is local issue that has impacted on both cost and supply of imports. However, given that the UK produces ~60% of the food we consume, there are a couple of other issues that are more likely to be be underpinning inflation; increases in both labour and energy costs. Again, both Brexit and Ukraine, respectively, bear on these factors and there is no doubt a web of causation here.
Why do other data sources show different results?
ONS data for levels of food cost inflation reveals sugars to be the food group with the highest rate of inflation (12 months to March ’23). Please note that, as well as being over a 24 month period (not 12), our study does not look at wholesale prices of all supermarket foods but rather focuses exclusively on the CPI’s basket of goods. We looked at the cost to the end-customer and reviewed the prices of a single large UK supermarket chain (Sainsbury’s). It’s important to note that supermarkets often partake in pricing strategies such as “loss leader” pricing, whereby certain staple foods are sold at a loss to entice shoppers into store (where margins are made on other products customers purchase).
Final thoughts
The causative factors behind food price inflation in the UK are largely transitory but are unlikely to fundamentally change for some time. Given this, we should expect the cost of our groceries to remain high for the foreseeable and most of us need to remain prudent when it comes to selecting which products to put in our shopping basket. Some choices may well prove to be more environmentally friendly, like eating less meat, for example. Given that olive oil is the product for which prices have increased the most, shoppers may wish to consider swapping olive oil for British-grown rapeseed oil since it has many of the same properties, isn’t imported and will cost at least 15% less.
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