Shell shock as the cost of a humble egg puts supermarkets in firing line

It was the humble egg which started it all.

For months, consumers have been complaining about rising weekly shopping bills, worried there will come a point some time soon when all luxuries will have to be abandoned in favour of cupboards stocked instead with supermarket own brands.

No-one paid too much attention to the complaints and most accepted that with the country coming apart at the seams, together with the recent VAT hike, increased weekly food bills were just another price we would all have to pay.

With the coalition currently in the middle of an unenviable public relations exercise to convince us all of the merits of massive cuts to defence budgets, and increased university tuition fees, a couple of pence on a loaf of bread seemed unlikely to prompt questions in the House of Commons.

However, earlier this week, when it emerged that the cost of a single egg is 30p and rising, it served to concentrate industry minds. The initial reaction was that it was just another example of the knock-on effect of the rising price of the wheat used in the production of poultry feed and the soaring cost of the petrol needed to transport goods.

However, according to a report published yesterday, it seems that is not quite the full story, and if the research is right, supermarkets could well be guilty of cashing in on the economic crisis, using dire news elsewhere as an excuse for raising prices.

According to the investment bank, UBS, food not only costs more in Britain than in most other European countries, but it is rising way beyond inflation. Annually, food bills in this country are increasing by 4.9 per cent, a figure which compares with 3.6 per cent increase in Germany, a Eurozone average of 1.8 per cent and an increase in the US of just 1.5 per cent.

“All economies have seen an increase in consumer food prices over the last year,” says economist Paul Donovan, who co-wrote the report. “However, even against that backdrop, the UK does stand out.

“Commodity price inflation over the past few months would justify an increase in processed food prices of up to 3.5 per cent, but supermarkets have actually increased prices by between 6 and 6.5 per cent.

“Prices are rising in excess of justifiable cost increases and politicians may well be asking, ‘if everyone faces the same commodity price increases, why does the UK have so much more food inflation?’.”

The accusation is potentially a serious one. If supermarkets are raising prices simply because, with the public braced for financial hardship, they can get away with it, the Government could launch yet another competition inquiry which would expose any sharp practices.

“It is easy to link rising food prices with the rising cost of production, but, in truth, it has very little to do with agriculture,” adds Donovan. “Take something like milk, which has farm gate price of around 26p a litre, but costs the consumer between 59p and 79p.

“A poll earlier this month showed that a large number of people said they expected inflation would have a strong or very strong impact on their lifestyles over the next six months.

“How much we pay for our morning croissant or the sum total of a weekly shopping basket is what dominates our image of inflation, but the fact is that UK food prices are rising much more rapidly than most other countries from within the Organisation for Economic Co-operation and Development.”

The price hikes have already had an impact on shopping behaviour, with many consumers trading down and discount supermarkets benefiting from the renaissance in bargain hunters.

The price of food is one of the debates currently being aired on Mumsnet, with many families becoming concerned at just how far their weekly budgets will stretch.

“Food prices are definitely a lot higher than they were a year or two ago,” said one of the site’s contributors.

“Because I have a good memory for figures, I can tell you with absolute authority that a couple of years ago, 250g of prepacked steak mince in Sainsbury’s was £1.23. It is now £1.64, but reached the dizzying heights of £1.73 at one point.

“I have switched quite a few things to basics range, do a monthly shop at Asda to take advantage of cheap deals on items that don’t go off, and we are eating a lot more dishes that are bulked out with lentils.

“Prices have been rising in dribs and drabs over the last few years, but I’ve noticed a few things recently that have had quite a hike in price. If they continue to rise at the same rate, I think we’ll be seeing a lot of people having to make some very hard choices, including being unable to eat as healthily as they would like.”

So far, the impact may have been minimal, but rising food prices elsewhere in the world have sparked serious demonstrations.

Earlier this month, thousands of people gathered in the Indian capital, Delhi, where high unemployment is also threatening stability. Carrying red flags, a steady stream of protesters marched through the streets bringing the city to a standstill and highlighting the problem of inflation, which has sent the price of pulses, milk, rice and vegetables soaring.

Such protests may be common in the developing world where thousands live below the poverty line, but according to UBS, when it comes to political agitation, the UK could will be next, and they are not the only ones who have sounded a warning bell for the future.

Research by the Joseph Rowntree Foundation has shown that rising prices are threatening to tip over the edge those just about managing to get by, and just this week Labour leader Ed Miliband warned of an impending “crisis” as the cost of living outstrips wage rises for people on low and middle incomes.

Unsurprisingly, those representing the large supermarkets moved quickly to rubbish the UBS report.

The British Retail Consortium accused the investment bank of not only overlooking promotional activity, which has led to a rash of buy-one, get-one-free offers, but also an extra £670m of Government-imposed costs which have hit the retail sector in recent months.

“Currently, 39 per cent of groceries are now on promotion,” says the BRC’s director general, Stephen Robertson. “No-one goes shopping and ignores all the special offers. It isn’t an accurate reflection of real life.

“What matters is not the rate of change of prices, but the absolute level of prices. There is no question that grocery prices in this country are still lower than in many other developed countries because of our intensely competitive supermarket industry.

“Food prices have not risen at anything like the same rate. It is clear that supermarkets are shielding customers from the full impact.”

That may not be enough to convince many that the image of rip-off Britain will ever be consigned to history.

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