UK food price inflation hits highest level since global financial crash | UK cost of living crisis

The rapidly rising price of food including milk, margarine and crisps pushed August shop price inflation to the highest levels since 2008 as the war in Ukraine raised costs for farmers.

Prices in shops rose by 5.1%, a big increase from 4.4% in July, as food producers passed on increases in the cost of fertiliser, wheat and vegetable oils, large amounts of which are produced in Ukraine and Russia, according to data from the British Retail Consortium (BRC) and market research firm NielsenIQ.

Fresh food prices rose by 10.5%, the highest rate since September 2008, when the global financial system was on the brink of collapse. The increase from a rate of 8% in July more than offset a slight decline in non-food inflation of 3% in August from 2.9% a month before.

The rise in shop prices adds to pressure on households already struggling to cope with the prospect of much higher household energy bills this autumn and winter as well as high petrol prices. Those on the lowest incomes are expected to be hit hardest by inflation because a larger proportion of their budget goes on essentials including food and energy.

Helen Dickinson, the chief executive of the BRC, which represents thousands of shop owners, said: “The situation is bleak for both consumers and retailers, but retail businesses will remain committed to supporting their customers through offering discounts to vulnerable groups, expanding value ranges, fixing prices of essentials and raising staff pay.

“However, as retailers also grapple with growing cost pressures, there is only so much they can shoulder. The new prime minister will have an opportunity to relieve some of the cost burden bearing down on retailers, like the upcoming increase in business rates, in order to help retailers do more to help their customers.”

The Bank of England raised rates by 0.5 percentage points this month, the biggest single rise in almost 30 years, as the overall measure of inflation topped 10% for the first time since the 1980s.

A fifth of UK households now have an average shortfall of £60 a week between what they earn and what they need to cover essentials such as energy bills, rent, transport and food, as the rising cost of living leaves people with the lowest amount of spare cash in almost five years, according to data from the Asda Income Tracker collated by the Centre for Business and Economic Research out last month.

Shoppers are already trying to make their budget stretch by switching to discount stores, dropping brands in favour of supermarkets’ own label goods and trimming back spending on luxuries such as subscription services and gambling. About a quarter of Britons say they are attempting to reduce car journeys, according to Barclaycard, with more than half of those saying they will walk more.

There is also a switch back towards high street shopping from buying online, thought to be part of an effort to reduce unnecessary spending by checking items out before buying and cutting back on delivery costs.

However, life is expected to get tougher with one bank predicting inflation in the UK will hit 18% early next year. The Bank of England expects inflation to reach 13% by the end of the year, while the Resolution Foundation thinktank has forecast it could reach as high as 15% by early 2023.

Unions have called on the government to increase the minimum wage to help families cope with inflation as families face “a desperate autumn and worse winter”.

Mike Watkins, the head of retail and business insight at NielsenIQ, said shoppers were already cutting back on the number of items they were putting in their baskets at the supermarket and were expected to try to rein in spending in the final three months of the year as they try to deal with rising energy bills.

He added: “We can expect this level of food inflation to be with us for at least another six months but hopefully some of the input cost pressures in the supply chain will eventually start to ease.”