UK Grocery Price Inflation Soars to Record-High 16.7 Percent, Adding Nearly £800 to Annual Bills

An Aldi discount supermarket in Northwich, England. Photo by Christopher Furlong/Getty Images

Grocery inflation in the United Kingdom has hit a record high of 16.7 percent, adding an extra £788 ($970) to annual shopping bills, according to data from market researcher Kantar published on Jan. 31.

The 2.3 percentage-point jump in the four weeks to Jan. 22 was up from 14.4 percent in December and marked the highest level since Kantar started tracking the figure in 2008, with costs soaring on key staples, including milk and eggs.

The increase will no doubt deal an extra blow to consumers who are already battling with a cost-of-living crisis as inflation has risen drastically this year, coming in at 10.5 percent in December, although it is showing signs of easing after dropping from 10.7 percent in November, according to the Office for National Statistics (ONS).

Still, the cost of food remains high and could see households having to splash out nearly £812 ($1,000) extra a year unless they change their shopping habits, Kantar says.

“Late last year, we saw the rate of grocery price inflation dip slightly, but that small sign of relief for consumers has been short-lived,” Fraser McKevitt, Kantar’s head of retail and consumer insight, said, adding that the December jump in food prices was “staggering” and flew past the previous high level the researcher recorded in October 2022.

Supermarkets Boosting Own-Brand Lines Amid Competition

According to Kantar’s data, sales of supermarkets’ own-label lines grew 9.3 percent in January as supermarkets attempt to fend off competition and retain customers., while sales of branded products, which are typically more costly, were up by just 1.0 percent.

However, as many supermarkets move toward lowering everyday pricing, customer spending on promotions dropped in January to its lowest level since at least 2008.

German discounter Aldi was the fastest-growing supermarket for the fourth month in a row, with sales rising 26.9 percent year over year as shoppers look for cheaper options. It now holds 9.2 percent of the market, according to the data. Meanwhile, Lidl’s sales jumped by 24.1 percent compared to a year earlier, to give it a 7.1 percent market share.

Overall take-home grocery sales rose by 5.7 percent during the four-week period and by 7.6 percent over the quarter.

The latest numbers come after data released by ONS on Jan. 18 showed that food and drink inflation was up 16.8 percent in December, up from 16.4 percent a year prior, marking the highest level since September 1977, despite inflation showing signs of slowing down.

Everything from milk, cheese, and eggs saw prices soar, while the costs of sugar, jam, and chocolate also shot up, the data showed.

Brits Brace for Another Interest-Rate Hike

More pain looks set to come for UK households as government support for energy bills—which have soared this year—is scaled back and mortgage rates rise, while the Bank of England looks likely to initiate a half-point interest rate hike on Thursday, bringing it to 4 percent.

Following that increase, most economists polled by Reuters forecast one more rate rise, to 4.25 percent, in March. Financial markets expect the monetary tightening cycle to end in the middle of this year at 4.5 percent.

UK Prime Minister Rishi Sunak has vowed to halve the rate of inflation this year and ease the cost of living while granting Britons financial security.

On Tuesday, a poll from YouGov s and U.S. bank Citi showed that the UK public’s expectations for future inflation fell this month, dropping to 3.5 percent from 3.6 percent in December for expectations of out to five and 10 years.

For inflation in a year’s time, expectations in January fell to 5.4 percent from 5.7 percent a month prior, the poll found.

However, the International Monetary Fund (IMF) also said on Tuesday that the United Kingdom will likely fall into a recession this year, contracting by 0.6 percent in 2023, marking a 0.9 percentage-point downward revision from October.

The IMF said the new expected contraction figure is based on tighter fiscal and monetary policies, financial conditions, and increased energy costs that are weighing on household budgets.

Reuters contributed to this report.