The worst of rising food prices is “yet to come” ahead of a potential five per cent increase in spring, the chairman of Tesco has said.
It comes amid the cost of living crisis, which will result from surging energy prices and increased national insurance contributions in April.
John Allan said food prices at the supermarket chain grew by only one per cent in the last quarter but could rise by five per cent in the coming months.
‘Worst is still to come’
He told the BBC’s Sunday Morning programme: “Food is a relatively small part of household spending, it’s only about nine per cent, that figure has halved in the last half century.
“But of course, it’s a bigger proportion for those on the lowest incomes. So I think we’re concerned particularly about what can we do to try to protect those who are hardest up, who are going to suffer most from that?
“And in some ways, the worst is still to come because although food price inflation in Tesco over the last quarter was only one per cent, we are impacted by rising energy prices; our suppliers are impacted by rising energy prices.
“So the likelihood is that that inflation trigger will rise but we’re doing all we can to offset it.”
‘Significant’ food price hikes
The governor of the Bank of England, Andrew Bailey, has warned that inflation could hit 7.25 per cent by April and is unlikely to fall back to normal levels for two years.
The Bank raised interest rates to 0.5 per cent on Thursday with further rises expected.
It comes as the government said it has not ruled out stepping in with more support if energy bills rise again as expected in October.
Allan added: “I predicted last autumn that food prices by the spring might be rising about five per cent.
“I sincerely believe that it’s not going to be any more than that, it might even be slightly less, but that’s the sort of number we’re talking about.
“But of course five per cent, if you’re spending – as some of the least well-off families are spending – 15 per cent of your household income, is significant.
“It troubles us and I’m sure troubles many people that people may have to struggle to choose between heating their homes and feeding their families and that’s clearly not a situation that any of us should tolerate.”
He added that fuel prices are “unlikely to come down very quickly”.
“There has been a huge surge in fuel prices in the last year. And I think our hope is that they will now stabilised and ultimately come down but they’re unlikely to come down very quickly, I think.”
Earlier this week, Tesco announced changes to overnight roles at a number of supermarkets and petrol station stores which will put more than 1,400 workers at risk of redundancy despite its eye-watering profits.