Food price rises could hit 9% in the UK this year, even if the strait of Hormuz opens in the next few weeks, figures suggest, as the Iran war raises energy prices.
The Food and Drink Association, which represents 12,000 food and drink producers, has predicted that prices will rise by “at least” 9% by the end of 2026, almost three times the forecast made before the Middle East conflict of 3.2%.
Dr Liliana Danila, chief economist at FDF, said the industry is now facing a sharp rise in the cost of electricity, transport and packaging, as well as disruptions throughout its supply chains.
“Current conditions are unprecedented and difficult to predict,” he said. “Considering the rate and speed of these cost increases, and despite the companies’ best efforts not to raise prices, it is clear that food prices will rise in the coming months.”
The 9% forecast assumes that the key strait of Hormuz shipping channel will be reopened to cargo traffic within the next two to three weeks, and most major energy resources, such as oil, gas and fertilizer fields, return to normal in the spring.
The chancellor, Rachel Reeves, is preparing to meet with UK supermarket owners on Wednesday afternoon.
Reeves is expected to meet with executives including the bosses of Sainsbury’s, Tesco and Morrisons to discuss the potential impact on the cost of living and potential supply caused by the conflict in the Middle East.
Food company Princes has raised prices on all its products in response to “unprecedented cost pressures” caused by the war.
The company, which makes canned tuna under the Princes brand, as well as Napolina and Crosse & Blackwell pasta, wrote to its customers telling them the price had gone up because of rising costs, as previously reported by The Grocer.
UK farmers and producers have said that without government help with rising energy bills there could be shortages of domestic tomatoes, cucumbers, peppers and aubergines.
Farmers’ representatives said that without the support of the ministers, or the suppliers they provide, the companies of new products could be damaged later this year when the high costs are biting.
Simon Conway, chairman of the British Tomato Growers’ Association (BGTA) said: “Historically, growers make money in the last few weeks of the season, as yields are very small in this sector.
Many businesses, which normally fix their energy contracts from April, will be hit by a huge cost rise from Wednesday amid an increase in standing charges, the fixed daily costs added to bills for accessing the UK’s gas and electricity networks.
BTGA and other food producers are campaigning to be labeled “energy users” by the government, which will help reduce their bills. Without support, “businesses will fail”, said Conway.
Electricity bills are another cost faced by food producers, along with the high costs of packaging and fuel needed to transport goods to retailers.
The effects of the series of price increases “aren’t here yet but they’re coming at the end of the summer,” Conway said, adding that retailers are recalling empty shelves in early 2023 when there was a shortage of fresh produce.
Meanwhile, household energy bills are due to fall until July, but are now expected to jump. The government is coming under increasing pressure to provide support on high energy bills, although it has so far suggested that any aid would be targeted at the most vulnerable households.
Reeves said in an interview with the BBC that the government was “looking at ways we can support people based on their household income”.
However, he did not commit to reducing fuel tax or VAT on fuel, saying he must be careful with promises to lower prices too much as that could increase inflation, interest and taxes.
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