The cost of living crisis is set to enter a new phase, with food prices overtaking energy bills, a new report has warned.
Households are likely to start to see energy rates beginning to fall when the new price cap is set at the end of this month - but will soon be paying an average of £1,000 more on food each year compared to before the Covid pandemic as supermarket prices continue to soar.
And lower-income families will be worst hit as they already buy budget products so can't select cheaper alternatives, experts say, as they warned the cost of living crisis is set to enter a "new phase".
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According to Barclays, 89% of shoppers are concerned about the impact of rising prices as food inflation hit a new record high last month. Food food prices rose by 15.7% compared to last year, prompting shoppers to downshift from premium ranges to standard or value ranges and switch from fresh food to frozen. Over one third (38%) of shoppers are buying ‘yellow sticker’ food nearing the end of its shelf life in a bid to save money during the cost of living crisis.
Food inflation has already reached a 50 year high this year, and the researchers say it will get even worse in the coming months.
Economist Lalitha Try told The Mirror that politicians do not seem to have grasped how serious the problem is. “Everyone realises food prices are rising, but it’s less clear that the scale of the increases has been understood in Westminster," she said. "This summer the food price shock to family finances is set to overtake that from energy bills. What remains consistent is that those on low-to-middle incomes are worst affected. The cost of living crisis isn’t ending, it’s just entering a new phase.”
The Resolution Foundation's study found that most people now spend 13% of their income on food, compared to 5% before Covid, and that 61% of the poorest households have cut back on food and other essentials, compared to 35% among the richest fifth of homes. Lower income families are worst hit, as they often already buy cheaper products so have less space for savings by downgrading the brands they buy.
"Poorer households, who are more likely to already be purchasing the cheapest products, are also less able to respond to rising food prices by changing what they purchase," said the report.
Supermarkets have faced heavy criticism over the last few months as the cost of food has skyrocketed. According to Grant Fitzner, chief economist for the Office of National Statistics (ONS), food prices overall are on the way down over the next few months but the drop had not yet reached supermarket shelves.
Several factors are to blame for the rapid rise in food prices including the war in Ukraine, Brexit and labour shortages. But although both Tesco and Sainsbury’s reported a drop in profits in recent weeks, experts say more could be done to help shoppers struggling with rising prices.
Prior to the cost of living crisis, the cost of a food shop dropped significantly as supermarkets competed to offer the lowest prices to temp people away from discounters such as Aldi and Lidl. But since last year, many have turned to their loyalty programmes to lock in customers by offering cheaper prices for members.
Last month, the Co-op supermarket became the latest to introduce two-tier pricing, with reductions for holders of its Co-Op Membership scheme, just days after Sainsbury's refreshed its Nectar Prices scheme to bring it in line with Tesco's Clubcard scheme.
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Chief executive of the British Retail Consortium (BRC) Helen Dickinson told the Grocery Gazette: “We should start to see food prices come down in the coming months as the cut to wholesale prices and other cost pressures filter through. In the meantime, retailers remain committed to helping their customers and keeping prices as low as possible.”
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