Tesco chairman warns of food price inflation at 5% by spring

John Allan fears rate will rise quickly after big hike in energy costs filters through supply chain

The chairman of Britain’s biggest supermarket chain has warned that “the worst is yet to come” on food price inflation, as he predicted it will soon hit 5%.

John Allan, who has chaired Tesco since 2015, told the BBC’s Sunday Morning programme that he was well aware people on very tight budgets were having to choose between food and heating. He said the idea that this was happening was very troubling.

Overall inflation currently stands at 5.4%, a 30-year high, and is predicted to top 6% in the spring, just one element of the cost of living crisis facing UK households. Poverty groups have warned about the impending threat to those on the lowest incomes.

“In some ways the worst is still to come – because although food price inflation in Tesco last quarter was only 1%, we are impacted by rising energy prices. Our suppliers are impacted by rising energy prices. We’re doing all we can to offset it … but that’s the sort of number we’re talking about. Of course, 5%,” he said.

Allan admitted some people would “of course” have less to spend on luxuries, as the price hikes coincide with a rise in national insurance contributions and the £693 increase in the average family’s annual energy bill, to £1,971, both of which come into effect in April.

But he said grocers and suppliers were not immune to rising energy costs. A report this week from the British Retail Consortium said food inflation accelerated to 2.7% in January, up from 2.4% in December.

Rising prices prompted the Bank of England to raise interest rates to 0.5% on Thursday, the same day the energy bill rise was announced and the chancellor unveiled a support package for households.

Sign up to the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk

Allan said: “I think the combination of increasing energy prices, the impact of national insurance increases on people’s incomes, and to a much much lesser extent increasing food prices, is going to squeeze the hardest-up still harder.”

The former chair of the CBI also defended Tesco against claims from food poverty activist Jack Monroe that the costs of basic staples were rising faster than other goods.

Allan said he could not speak for the rest of the industry, but said it was untrue at Tesco. “Price rises depend on individual products. Coffee is going up, but other things like the cheapest tin of baked beans in Tesco is cheaper than it was five years ago,” he said.

In January, Tesco announced booming Christmas sales and said it expected profits could top £2.6bn, higher than predicted in previous guidance.


Miles Brignall

The GuardianTramp

Related Content

Article image
‘Golden era’ of cheap food over as two in five Britons buy less to eat
ONS survey reveals worsening effects of cost of living crisis, with food prices forecast to have risen by 9% in April

Zoe Wood, Sarah Butler and Kalyeena Makortoff

13, May, 2022 @6:04 PM

Article image
UK food price rises could hit 15% over summer, report says
Ukraine war, China lockdowns and Brexit help push up inflation, with products that rely on wheat worst hit

Sarah Butler

15, Jun, 2022 @11:01 PM

Article image
UK inflation eases to 10.7% as annual rate of price increases slows
Drop in consumer prices index had been forecast but costs continue to rise, adding to pressure on ministers to raise pay

Phillip Inman

14, Dec, 2022 @7:01 AM

Article image
Record 13.3% UK food inflation raises fears of ‘another difficult year’
British Retail Consortium figures come amid concern over economy and rising cost of energy bills

Richard Partington Economics correspondent

04, Jan, 2023 @12:01 AM

Article image
Tesco boss: 'Food price inflation could be lethal for struggling millions'
Matt Davies points to damaging effect on economy, retailers, manufacturers and shoppers as data shows grocery deflation contracting

Sarah Butler

18, Oct, 2016 @2:30 PM

Article image
UK inflation forecast to hit 8% in April amid cost of living crisis
CPI rises to 5.5% in January with further increase expected as soaring energy bills squeeze households

Phillip Inman

16, Feb, 2022 @5:42 PM

Article image
Energy price rise: Rishi Sunak needs to do more, say experts
Cost of living crisis intensifies with average annual gas and electricity bill poised to double to £2,600

Rob Davies and Mark Sweney

01, Apr, 2022 @2:50 PM

Article image
Ukraine war and China lockdowns drive fastest UK price rises in years
Inflation on toys, furniture and clothing rose to 2.2% last month, the highest rate for 15 years

Sarah Butler

03, May, 2022 @11:01 PM

Article image
UK inflation hits 40-year high of 9% as cost of food and energy soars
Headline CPI rate fuelled by increase in household bills and rising transport costs

Phillip Inman

18, May, 2022 @8:40 AM

Article image
UK shop price inflation almost doubles in January
Food prices rose 2.7% but the biggest change was in items such as flooring, with prices up 0.9% compared with 0.2% in December

Sarah Butler

02, Feb, 2022 @12:01 AM