Retail leaders have slammed government measures to help the food industry face the cost of the Middle East crisis as “nowhere near” enough.
Responding after Chancellor Rachel Reeves announced plans to include certain quarters of the industry in a new energy bailout, the BRC claimed that despite having face-to-face talks with several supermarket CEOs about the threats posed by inflation, her measures had fallen well short of what had been asked.
The Chancellor announced at the IMF meetings in Washington yesterday that the government was stepping in to slash electricity bills for certain companies by up to 25% from April 2027.
The British Industrial Competitiveness Scheme (BICS) will be widened to include 3,000 extra companies, including hundreds of food producers, with sectors benefiting including those manufacturing oils and fats, starches and starch products, and sugar.
However, BRC CEO Helen Dickinson said the moves would not protect shoppers from a wave of inflation hitting them in the autumn unless ministers did more to bring down costs.
“In a recent meeting with the Chancellor, retailers made it clear that bringing down non-commodity charges that push up the industry’s and its suppliers’ energy bills would be key in helping soften the rise in food inflation,” she said.
“The extension of the BICS scheme today may offer limited relief to some early stages of the supply chain, but goes nowhere near far enough to help retailers shield consumers from price increases at the till.
”With prices set to rise due to the conflict in the Middle East, it is lower income households, who spend a higher proportion of their money on food, that will be hit hardest. Government must now go further with targeted time-limited support towards retailers and their suppliers to reduce the everyday inflation that is squeezing households.”
The supermarket bosses’ warning comes after reports that the government was preparing for the UK to face possible food shortages later this year if the situation in the Middle East was not resolved quickly.
BRC director of food and sustainability Andrew Opie denied that supermarkets were facing food shortages but he also called for ministers to do more to help them tackle inflation.
“Retailers are experienced in managing supply chain disruption, and there is no suggestion of any risk to food availability for consumers,” said Opie.
“However, the situation in the Middle East continues to add inflationary pressures at a time when retailers already face significant new costs from domestic policies. Government should consider what domestic policy levers it can use to reduce these costs, particularly those non-commodity charges that push up the cost of businesses’ energy bills.”
Mark Jones, a partner at law firm Gordons and an expert in the food and drink supply chain, said government moves to prevent a shortage of carbon dioxide were a repeat of challenges seen many times throughout Covid and the war in Ukraine, but warned further action would be necessary.
“We learn of a new way the war in Iran will affect us each day, a potential shortage of carbon dioxide being the latest.
“We’ve been here before with CO2 in 2018 and in 2021 – CO2 prices increased by around 15 times between 2021 and 2022. With the government helping to reopen the Ensus site in Teesside, availability may not be the challenge for the UK’s food and drink sector. The challenge will be cost.
“Food producers are seeing fuel, energy, CO2 and fertiliser prices go through the roof. Whilst consumers are insulated from commodity price rises to some extent, because retailers tend to have contracted prices with suppliers, these increases will feed through over time. Food prices rose 38.6% between November 2020 and November 2025. If the war doesn’t end soon, we could be looking at a 50% increase by 2027.”
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