The chairman of Britain’s biggest supermarket chain has warned ‘the worst is yet to come’ on food price inflation as he predicted it will soon hit 5%.
John Allan, who has been chairman of Tesco since 2015, told the BBC’s Sunday Morning program he was well aware that people on very tight budgets had to choose between food and heating. He said the thought of this happening was very disturbing.
Headline inflation currently stands at 5.4%, a 30-year high, and is expected to reach 6% in the spring, which is only part of the cost of living crisis facing British households. Anti-poverty groups have warned of the imminent threat to those with the lowest incomes.
“In a way, the worst is yet to come – because although food price inflation at Tesco last quarter was just 1%, we are being hurt by rising energy prices. “Our suppliers are being impacted by rising energy prices. We’re doing everything we can to compensate for that…but that’s the kind of number we’re talking about. Of course, 5%,” he said.
Allan admitted that some people would ‘of course’ have less to spend on luxuries, as the price rises coincide with an increase in National Insurance contributions and the £693 rise in a family’s average annual energy bill , at £1,971, both of which come into effect in April.
But he added that grocers and suppliers were not immune to rising energy costs. A report released this week by the British Retail Consortium said food inflation accelerated to 2.7% in January 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 hike was announced and the Chancellor unveiled a household support plan.
Allan said: “I think the combination of rising energy prices, the impact of National Insurance increases on people’s incomes and, to a much lesser extent, increased food prices, will squeeze the toughest even more.”
The former CBI chairman also defended Tesco against claims by food poverty campaigner Jack Monroe that the costs of basic foodstuffs were rising faster than other goods.
Allan said he couldn’t speak for the rest of the industry, but said that was wrong at Tesco. “Price increases depend on individual products. Coffee is going up, but other things like Tesco’s cheapest tin of baked beans are cheaper than five years ago,” he said.
In January, Tesco reported booming Christmas sales and said it expected profits to top £2.6bn, more than previously forecast.