Commenting on UK grocery spending soaring as food prices rise by 9.6%, Mark Lynch, Partner at corporate finance house to the consumer industries, Oghma Partners, said: “Food price inflation is being driven not only by current shortages of fruit and veg related to supply chain issues but also by the lag effect of food manufacturers catching up with previous cost pressures from last year. These price increases are necessary to re-coup the margins lost over the last twelve months. There are some glimmers of light on the cost pressure front with some costs coming down, for example, energy. However, for food inflationary pressures to be fully flushed out of the system we will need to see a reduction across the board in raw material costs. The UK has, unfortunately, shot itself partly in the foot through Brexit combined with the limited support given to various agri-sectors to increased energy costs. The impact of these supply side constraints can be seen in pork prices, egg availability, and cost including UK fresh produce supply and pricing. Therefore, whilst there should be some, and perhaps it may be quite significant cyclical decline in food pricing coming through in H2 2023, the UK may be uniquely badly positioned to fully rid itself of inflation from domestically produced products due to the lengthy hangover from the departure from the EU.”
