Rising fuel costs, spurred on by last week's increase in duty, are set to lead to higher shelf prices in multiples and convenience stores alike, logistics experts have warned.
On Tuesday, the cost of petrol and diesel rose by 2.3ppl as the third duty increase in nine months came into force. Duty was increased in December, to compensate for the temporary reduction in VAT, and rose again in April. Fuel tax will, perversely, rise again in January when VAT reverts to 17.5%.
The tax increases mean the average pump price is now 106.5ppl, higher than it was throughout 2007 and approaching last year's peak of 130ppl, despite crude oil being 37.5% cheaper than this time last year. The price of oil is also forecast to rise as the global economy begins to exit recession.
The Freight Transport Association said the hikes would cost haulage companies £810m when insolvencies among logistics companies were up 50%.
With logistics companies at breaking point, according to an FTA spokesman, most would be unable to absorb rising costs, so distribution charges to retailers look set to rise. Given IGD estimates that distribution costs make up between 3.5% and 8% of turnover for fmcg retailers, this could have a substantial impact on shelf prices.
This month's Grocer Price Index (GPI) suggests rising costs may already be contributing to a renewal of food price inflation. Month-on-month, prices have been falling for much of the year, but in August retail prices in the big four were 0.1% higher than the previous month, indicating food prices may have stabilised, as forecast by industry experts.
Prices rose most at Tesco, up 0.4% month-on-month, while average retail prices at Morrisons actually fell 1.4%.
The biggest category drop was in household (-6.0%), followed by fruit and veg and frozen, both down 3.3%, with the sharpest rise in biscuits and confectionery (0.2%).
On Tuesday, the cost of petrol and diesel rose by 2.3ppl as the third duty increase in nine months came into force. Duty was increased in December, to compensate for the temporary reduction in VAT, and rose again in April. Fuel tax will, perversely, rise again in January when VAT reverts to 17.5%.
The tax increases mean the average pump price is now 106.5ppl, higher than it was throughout 2007 and approaching last year's peak of 130ppl, despite crude oil being 37.5% cheaper than this time last year. The price of oil is also forecast to rise as the global economy begins to exit recession.
The Freight Transport Association said the hikes would cost haulage companies £810m when insolvencies among logistics companies were up 50%.
With logistics companies at breaking point, according to an FTA spokesman, most would be unable to absorb rising costs, so distribution charges to retailers look set to rise. Given IGD estimates that distribution costs make up between 3.5% and 8% of turnover for fmcg retailers, this could have a substantial impact on shelf prices.
This month's Grocer Price Index (GPI) suggests rising costs may already be contributing to a renewal of food price inflation. Month-on-month, prices have been falling for much of the year, but in August retail prices in the big four were 0.1% higher than the previous month, indicating food prices may have stabilised, as forecast by industry experts.
Prices rose most at Tesco, up 0.4% month-on-month, while average retail prices at Morrisons actually fell 1.4%.
The biggest category drop was in household (-6.0%), followed by fruit and veg and frozen, both down 3.3%, with the sharpest rise in biscuits and confectionery (0.2%).
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