Government must “intervene now” to help the food industry tackle the cost of war in the Middle East, retail leaders told MPs this morning.
They demanded “immediate government intervention” to help the sector fight inflation, including a six-month suspension of the extended producer responsibility packaging tax.
The call came after retail leaders told MPs that shoppers faced a year of historically high food prices because of the conflict.
Giving evidence to the Environment, Food & Rural Affairs (Efra) Committee, BRC director of food and sustainability Andrew Opie slammed reports in the national press that the war in Iran was set to lead to food shortages, insisting the supply chain was well equipped to avoid an availability crisis.
Widespread food shortages
Opie said that while fears of widespread shortages of staples were wide of the mark, retailers and consumers were facing a prolonged period of high food inflation. He warned ministers needed to act fast to help the industry offset costs.
“We have already got relatively historic high food price inflation of around 3.3% and we have been running higher food inflation since Covid,” Opie told the committee, adding that the real concern is that this situation will ”inevitably add costs”, putting pressure on prices and causing inflation to rise again.
“Our message for customers and food companies is this is going to be a really challenging time and not just in the short term,” he continued.
“We are now going to go into a period of at least a year of higher food inflation than anyone anticipated at a time when customers are struggling with high energy prices and we’ve got historically high food prices. This is a really challenging situation for supermarkets, suppliers, farmers and particularly for customers.”
The BRC’s call comes after it criticised Chancellor Rachel Reeves’ intervention on energy costs last week as “nowhere near” enough.
Reeves announced the government was stepping in to slash electricity bills for certain companies by up to 25% from April 2027 after widening the British Industrial Competitiveness Scheme (BICS) to include 3,000 extra companies, including those manufacturing oils and fats, starches and starch products, and sugar.
With the vast majority of the industry missing out on any help with energy costs, Opie said it was vital the Treasury rapidly stepped up support.
He said that support with energy costs was most important, while also asking ministers to consider other measures, including the suspension of EPR fees.
“There are things like large packaging costs it could look at, even if it it just suspends it for six months that money would go back into inflation, I guaranteed it, in a market as dynamic as this. It could look at how we roll out new regulation,” he said.
“Do we maybe pause for six months to allow food business, processers, farmers and retailers to adapt?”
No sense of urgency
Meanwhile the FDF today accused the government of lacking ‘urgency’ over the looming food inflation crisis.
Maintaining its prediction of 9%-10% food inflation by Christmas, the FDF called “rapid and targeted” action to cut energy costs for the most exposed businesses.
“Government is listening, but it’s the sense of urgency that bothers me,” said FDF CEO Karen Betts. “If we’re going to act to change what is coming, we need to act now.”
Betts told journalists that the FDF wanted support for manufacturers modelled on the Energy Bill Relief Scheme (EBRS) that ran during the Russian invasion of Ukraine, focussed on the sector’s most energy-intensive sectors.
“Energy is embedded in every part of the system. Up to now, we’ve only seen the beginning of that spike. That doesn’t mean that inflation isn’t building in the system.”
While she welcomed the expansion of the BICS scheme last week, she said the expansion “doesn’t go very far”.
Only a small proportion of food manufacturing – largely limited to sugar and food oils manufacturers – is included in the energy discounting scheme.
“If you want to help us stall food price inflation, there are things you can do right across the board on energy,” said Betts. “But you need to act quickly, because if we don’t get that in as inflation starts to build, then it will be too late – it will have started to work its way through the system and ultimately into prices.”
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