Vegetable Shortages Drive Unexpected Rise in UK Inflation

A customer shops for food items inside a Tesco supermarket store in east London, on Jan. 10, 2022. Daniel Leal/AFP via Getty Images

Inflation in the UK rose unexpectedly last month as vegetable shortages pushed food prices to their highest rate in more than 45 years, official figures show.

According to the latest data from the Office for National Statistics (ONS), the Consumer Prices Index (CPI) rose by 10.4 percent in the 12 months to February 2023, up from 10.1 percent in January but below a recent peak of 11.1 percent in October 2022.

The inflation rise is a surprise because most economists had expected CPI to fall to 9.9 percent in February.

On a monthly basis, CPI rose by 1.1 percent in February, compared with a rise of 0.8 percent in the same month last year.

ONS Chief Economist Grant Fitzner said: “Inflation ticked up in February, mainly driven by rising alcohol prices in pubs and restaurants following discounting in January.

“Food and non-alcoholic drink prices rose to their highest rate in over 45 years with particular increases for some salad and vegetable items as high energy costs and bad weather across parts of Europe led to shortages and rationing.

“These were partially offset by falls in the cost of motor fuel, where the annual inflation rate has eased for seven consecutive months.”

The data adds to the headache for the Bank of England—Britain’s central bank—ahead of its decision on interest rates on Thursday, with policymakers already facing a dilemma given recent turmoil in financial markets and fears of a banking crisis.

Some experts have been predicting the bank would hold off from raising rates further owing to the market volatility, but the latest inflation data will likely complicate the decision.

A general view of the Bank of England, in London, on Nov. 11, 2022. Dan Kitwood/Getty Images

Soaring Food Prices

According to the ONS, food and non-alcoholic beverage prices rose by 18.2 percent in the year to February, up from 16.8 percent in January and the highest since August 1977.

The largest factor driving up food prices was vegetables. The UK has suffered shortages of salad produce and other vegetables, reportedly because of bad weather in southern Europe and North Africa, and the impact of higher electricity prices on produce grown out of season in greenhouses in the UK and northern Europe.

These price movements resulted in an annual rate of 18.0 percent for vegetables in the year to February 2023, the highest rate since February 2009.

The annual rates in February for bread and cereals, chocolate and confectionery, ready-meals and sauces, and hot beverages were each the highest since at least 2008, the ONS said.

The latest data showed that soaring prices of drinks in pubs and restaurants also drove inflation higher, coming after discounting in January and as the hospitality sector looks to offset sky high energy and staff bills.

Inflation overall in restaurants and cafes stood at 11.4 percent last month, up from 9.4 percent in January and the highest since December 1991.

Chancellor of the Exchequer Jeremy Hunt leaves 11 Downing Street with his ministerial box, before delivering his Budget at the Houses of Parliament, London, on March 15, 2023. Stefan Rousseau/PA Wire

‘Omnishambles’

Commenting on the latest inflation figures, Chancellor of the Exchequer Jeremy Hunt said, “Falling inflation isn’t inevitable, so we need to stick to our plan to halve it this year.”

He added: “We recognise just how tough things are for families across the country, so as we work towards getting inflation under control, we will help families with cost-of-living support worth £3,300 on average per household this year.”

Opposition parties blamed the Conservative government for the inflation rise.

Labour’s shadow chancellor Rachel Reeves said: “The reality is that under this Tory government, families are feeling worse off and nothing is working better than it did 13 years ago.”

Sarah Olney, Treasury spokesperson for the Liberal Democrats, said the rise was “just more proof why the chancellor should have cut energy bills in the budget.”

“The Conservatives’ record on the cost-of-living crisis has been nothing short of a disaster, people shouldn’t have to pay the price for this government’s economic omnishambles,” she said.

‘Stubborn Peak’

February’s rise suggests that the cost of living pressure is far from over for British households and businesses.

However, economists still believe inflation will begin to ease again this year.

The UK fiscal watchdog—the Office for Budget Responsibility—last week cut its forecasts for inflation, predicting CPI would end the year at around 2.9 percent.

Alpesh Paleja, lead economist at the Confederation of British Industry, said that “while inflation rose in February, the outlook for the months ahead is looking more benign.”

But he added, “Despite further falls over the coming months, this year will still be a high-inflation environment for both households and businesses.”

David Bharier, head of research at the British Chambers of Commerce, said the unexpected inflation rise indicates “the UK economy is still in the midst of a stubborn peak.”

“The longer this goes on, the greater the impact on businesses and consumers, as much higher prices become the norm,” he added.

PA Media contributed to this report.