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Tuesday, Jun 03, 2025

UK inflation @ 40-year high as food prices rise

UK inflation @ 40-year high as food prices rise

British food prices rose at the fastest pace since 1980 last month, driving inflation back to a 40-year high and heaping pressure on the embattled government to balance the books without gutting help for the nation’s poorest residents.
Food prices jumped 14.6% in the year through September, led by the soaring cost of staples such as meat, bread, milk and eggs, the Office for National Statistics said Wednesday. That pushed consumer price inflation back to 10.1%, the highest since early 1982 and equal to the level last reached in July.

The figures immediately fueled demands that the government do more to help families and retirees as it struggles to regain credibility after an ill-fated package of tax cuts roiled financial markets. Treasury chief Jeremy Hunt ditched the package after he took office last week, but he has warned that this will be a difficult winter and spending reductions also will be needed.

Glenn Sanderson, head teacher at St. Aidan’s Catholic Academy in Sunderland, said schools across the country are finding it difficult to feed needy children, with many diverting money from textbooks and classroom teaching to subsidize meal programs. The suggestion of government budget cuts in this environment is “appalling,” he said.

“Parents … are having to make difficult decisions — do they pay the bus fare to send their child to education or do they use that money to feed their child?” Sanderson told the BBC. “In today’s society, I find that completely unacceptable.”

Hunt this week told the House of Commons that the government would “prioritize help for the most vulnerable while delivering wider economic stability.”

Prime Minister Liz Truss reinforced that point during the weekly prime minister’s questions session Wednesday, repeating a previous commitment to increase pensions in line with inflation. She didn’t make a similar promise on benefits but hinted they would.

Russia’s invasion of Ukraine has boosted food and energy prices worldwide, with shipments of natural gas, grains and cooking oil disrupted. That added to price rises that began last year as the global economy started to recover from the COVID-19 pandemic.

While the jump in food costs took the biggest bite out out of household budgets in Britain last month, prices are rising across the board. Transportation costs jumped 10.9%, furniture and households goods rose 10.8%, and clothing was up 8.4%. Housing costs rose 9.3%, driven by the rising price of energy.

The government has sought to shield consumers from the impact of rising energy prices by capping the cost of electricity and natural gas. But Hunt has now limited the price cap to six months, instead of the two years originally promised.

That means inflation is likely to stay higher for longer than previously forecast, said Jack Leslie, senior economist at the Resolution Foundation, a think tank that focuses on improving living standards for low- and middle-income people.

“This bleak outlook means that family incomes will continue to fall sharply again next year, especially as support with energy bills is withdrawn,” Leslie said in a statement. “That is the context of debates within government about whether previous commitments to uprate benefits or pensions in line with prices should be the next U-turn to be announced.”

Faster inflation also fuels expectations that the Bank of England will raise interest rates further and faster as it struggles to return inflation to its 2% target.

The central bank is trying to slow inflation without tipping Britain into recession. The British economy shrank an estimated 0.3% in August after growing just 0.1% in July, according to ONS figures.

“Today’s hotter-than-anticipated inflation reading paves the way for another aggressive interest rate increase from the Bank of England at its next meeting in early November,” said Victoria Scholar, head of investment at Interactive Investor. “However, the central bank is between a rock and a hard place as it looks to curb price pressures without inadvertently adding to the risk of recession.”

It’s the same calculation going on in other countries, but the U.S. Federal Reserve has signaled it will continue its rapid rate hikes to combat inflation that is at a decades-high 8.3%.

The European Central Bank at its meeting next week is expected to make another big increase to curtail record inflation in the 19 countries that use the euro currency. The EU’s statistics agency, Eurostat, on Wednesday adjusted eurozone inflation for September down slightly to 9.9%.
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