It’s not every day the Bank of England rings you up to chat about inflation. But, as they say in the adverts for the National Lottery, it could happen to you. Or rather, it did happen to me. Once.
During Easter 2021, my peerless FDF colleague Dominic Goudie pointed out food price inflation was starting to accelerate and would hit double digits by early summer. With the national media focused on post-Brexit and Covid disruption, I had a platform.
So I started to warn about the gathering pace of price increases every time I was on the airwaves. Given that was rather a lot at the time – vastly too much for most viewers and listeners – these warnings received a lot of airtime.
Hence the email from the bank. It wanted to know why the FDF thought food price inflation was potentially out of control when its own economists disagreed. We talked them through our reasoning and why we thought the problem was more structural than had been allowed by other commentators. The bank was kind enough to listen and consider what we said.
As it turned out, they were wise to do so. Food price inflation did hit double digits and continued upwards through 2021 and throughout 2022. It remains stubbornly up there, even if the most recent figures suggest the rate of increase has started to slow. But even that means prices will continue to rise, offering a daily and very public challenge to the government’s promise to bring inflation back to low single figures by the end of the year.
The juxtaposition of that promise and the continued rise of food prices poses a big concern for the food industry. That was evinced by Liam Halligan writing this week in the Sunday Telegraph. Halligan is also a heavyweight economist and someone to whom the government listens carefully.
At the end of the thoughtful piece, in which he argued inflation should be on the decline in the UK economy, he focused on food prices being out of line. Perhaps, he mused, “eye-watering food prices may be at least partly explained by anti-competitive pressures along the supply chain”. Ouch.
As highlighted by the bank in 2021, by John Allan of Tesco a few weeks ago and by Halligan at the weekend: food price inflation does not fit the narrative of receding price increases. So, commentators sympathetic to the government surmise something funny must be going on, and someone must be taking advantage of our national economic difficulties to make an unrequited profit.
It’s vital that the whole food and drink industry rebuts this nonsense. From farm to fork via stores and hospitality, we must explain why food prices continue to rise while other prices have begun to stabilise or – as in the case of energy – fall.
In a febrile national polity, we cannot afford to become the villains of this argument. It is one we must win to retain the confidence of our shoppers and consumers.
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