Shoppers are cutting back on their pre-Christmas food spending amid high inflation and worries over the Budget, the head of the food and drink industry group has warned.
Karen Betts of the Food & Drink Federation (FDF) blamed higher taxes and government red tape for pushing up prices in the shops.
And she claimed that businesses and consumers are holding back on spending while they wait to see the impact of the Budget on 26 November, which is widely expected to increase taxes on households and firms.
This comes as The i Paper revealed the costs of supermarket own-label products such as eggs and better are rising.
Consumer group, Which?, said premium own-brand food and drink has the highest rate of inflation compared with other ranges, with prices for these products up 8.6 per cent year-on-year in August – products with the highest percentage increase include carrots, which have gone up by 107.9 per cent on average
This time of year is normally a boom season for food and drink retailers and suppliers as their customers stock up on festive meals, snacks and treats ahead of the Christmas period.
But Betts warned that while seasonal goods were still being sold in large numbers, they are now being picked up instead of, rather than as well as, consumers’ regular shopping baskets.
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She told The i Paper: “The final quarter is really critical in our sector. And generally, I think, what we see is that basket sizes tend to go up in the final quarter of the year, and people tend to add on boxes of chocolates and whatever it is, gifts or they’re stocking up their cupboards for the Christmas period with festive food and drink that people are going to want to enjoy on family occasions and with friends.
“And I think what we’re seeing… is that where people are buying those items now, they tend to be within their same basket spend, so not as an add-on to a basket that they would otherwise have bought.”
Betts added that even an upbeat Budget would leave businesses struggling, saying: “Even if then the mood of gloom lifts and people do decide to spend into Christmas, you’ve only got two or three weeks of proper Christmas trading left.”
Higher food prices have been a significant contributor to overall inflation in recent months, with costs up 4.5 per cent year on year according to the latest data.
Some politicians have accused retailers of deliberately cashing in by hiking their prices, but the FDF insists that is untrue – pointing to relatively small profit margins across most of the sector.
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Betts said: “We hear all the rhetoric about growth and regulatory reform that is not yet translating into specific policies to drive growth in our sector, where we think there is loads of opportunity, and to reform out-of-date, burdensome regulation.”
She added: “We have had something like 12 years of inflation in the last two years, and it is very visible to people that food and drink is costing them more, but there are lots of reasons that it’s costing more that we the industry can’t control.”
The FDF has specifically pointed to higher national insurance contributions brought in at the last Budget, the burden of business rates – which will be overhauled at the upcoming Budget – and new rules designed to reduce packaging waste as additional costs levied on food suppliers.
Betts said: “Businesses are nervous. They would rather not have another big surprise.”
A Treasury spokesman said: “The Chancellor has been clear that one of her priorities in the upcoming budget is cutting bills. Food inflation is falling, and our recent deal with the EU, our biggest trading partner, will help make food cheaper and UK exports easier to support the farming industry. But we know there’s more to do to support working people with the cost of living.
“The tax decisions we took at the Budget last year mean that we have been able to deliver on the priorities of the British people by investing in the NHS helping to cut waiting lists and the Chancellor will continue to prioritise cutting waiting list at the Budget.”
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