Market News

(Bloomberg) -- Britons are paying more for their everyday products like milk and baby food than other Europeans, as inflation chips away at household budgets.

An analysis of supermarket sales transactions shows the UK experienced the steepest increases across most of ten major product groups compared with an average of prices in Germany, France, Italy, Spain and the Netherlands. Milk and cheese prices jumped the most in the year to March, but pet food, laundry detergent, infant formula and diapers also recorded more marked increases than in Europe, according to data provider Circana. 

Britain is largely outpacing Europe too on a price per unit basis. For example, UK shoppers pay €5.06 ($5.45) per container of laundry detergent compared with €2.68 in Spain. 

The analysis will fuel the debate about the soaring cost of food in Britain, with frustration setting in as shoppers absorb the sharpest jump in prices since 1977. Groceries have now replaced energy costs as the biggest cause of inflationary concern for the Bank of England. Prime Minister Rishi Sunak has launched a series of reviews into the fairness of food supply chains, just as the country’s antitrust regulator investigates the cost of groceries.

“People are in despair,” said Angela Moohan, chief executive officer of Scottish anti-poverty charity The Larder. “People were having to choose between heating and eating. Now they can’t afford to do either.”

Supply Chain Weakness 

Britain is a net food importer, meaning it’s extra vulnerable to tight supply. Leaving the European Union hasn’t helped. Research by the Center for Economic Performance at the London School of Economics found that Brexit added an extra £5.8 billion to UK consumers’ food bills in the two years to the end of 2021. 

“There needs to be a laser focus on immediate issues and the drivers of inflation,” says Karen Betts, chief executive officer of the Food and Drink Federation. “Action to fill labor and skills shortages and to simplify current and upcoming regulation, as well as simplifying post-Brexit labeling changes, would help to drive down prices.”

Disparities in price could further prompt policymakers across the continent to try to keep a lid on further rises. In France, food producers this week agreed to reopen price negotiations with supermarkets, ceding to government demands to help ease inflation pressures on consumers. 

Supermarkets and suppliers have already been at loggerheads over prices for months with grocers feeling harder hit than big producers whose double-digit profit margins have historically dwarfed those of their retail customers. For example, Unilever Plc’s operating margin is about 16% although it said record price increases have still not fully offset its own higher costs. By comparison, Tesco Plc, Britain’s largest grocer, reported a margin of about 4% at the half year. 

Two years into the inflation crisis cracks are opening up that are “too wide for food banks and charities to plaster over,” said Labour MP Siobhain McDonagh. She said a likely drop in the rate of inflation next week will be “cold comfort to consumers who must rightly wonder whether any failling costs will ever be passed back on to them.” 

Yet UK is still more affordable on groceries than most other countries, said David Hughes, emeritus professor of food marketing at Imperial College London. 

“When inflation is high, there’s always a hunt for the culprit — whether that’s manufacturers or retailers,” he said. “But in reality the culprit is generally the market.”

--With assistance from Agnieszka de Sousa, Joshua Gallu and Thomas Mulier.