Food caps ‘would not alleviate’ pressure on suppliers, industry says

30 May 2023

Industry groups have claimed government plans to introduce voluntary price caps would not materially improve things for either consumers or suppliers.

British Retail Consortium (BRC) director of food & sustainability, Andrew Opie, said any voluntary price cap scheme – such as that being considered by the government – would not help alleviate pressures faced by shoppers or suppliers. 

Opie said: “This will not make a jot of difference to prices. High food prices are a direct result of the soaring cost of energy, transport, and labour, as well as higher prices paid to food manufacturers and farmers.” 

The BRC’s response comes after health secretary Steve Barclay said this weekend that the government is now considering such a scheme.

In an interview with Laura Kuenssberg, Barclay said: "The government is working constructively with supermarkets to see how we can address the very real concerns around food inflation and the cost of living, and to do so in a way that is also very mindful of the impact on suppliers.”

He added a possible scheme was being considered along the lines of one recently introduced in France, which introduces limits on basic food prices.

Barclay claimed such a scheme would mitigate “the impact [on] suppliers and make sure we protect suppliers who themselves face considerable pressures.”

But Opie disagreed. He denied retailers have been profiteering from the cost of living crisis, and said the government must first tackle “red tape” if it is to support the UK’s food sector. 

He said: “Supermarkets have always run on very slim margins, especially when compared with other parts of the food supply chain."

He added: “[Supermarket’] profits have fallen significantly in the last year. Even so, retailers continue to invest heavily in lower prices for the future, expanding their affordable food ranges, locking the price of many essentials, and raising pay for staff.”

He continued: "As commodity prices drop, many of the costs that keep inflation high come from the muddle of new regulation coming from the government. Rather than recreating 1970s-style price controls, the government should focus on cutting red tape so that resources can be directed to keeping prices as low as possible."

NFU president, Minette Batters, told Supply Management that the UK needs a long-term solution to tackle food costs and the “complex issues” facing the supply chain.

“Farmers are asking how a price cap would address these challenges, such as soaring input costs, extremely tight margins on production and the impact of new trade agreements.

“The risk is that a price cap will see any squeeze on margins pushed down the supply chain to the farmer or grower, making food production even more challenging. Instead, what farm businesses and shoppers need is coordinated action across government to support confidence, investment and growth in British food.”

Meanwhile, consultancy Making Business Matter CEO, Darren Smith, warned that the move is a “PR exercise designed to calm the masses while the problem remains a problem,” and argued the move benefits the government more than suppliers. 

“Government officials can sleep a little easier at night because they are doing something. Plaster and broken leg come to mind,” Smith told SM

“Suppliers will be impacted as products are chosen by the supermarkets, like when price deal products are chosen. There will be some funding from marketing to support bread at 15% less than it should be, but someone has to pay for the rest. Who? The supply chain. 

“The supplier, the baker, the lorry driver, the grower – everyone will feel the pinch. While they go into a supermarket and are glad to see a loaf of bread has not sky-rocketed like everything else, they’d be happier with a pay rise, or even just to keep their job. The problem is fossil fuels and while we are making in-roads, we just aren’t doing enough to free us from our reliability on them.”

The government is looking to take action after the Office for National Statistics announced food and non-alcoholic drink inflation hit 19.1% in April.

The government also announced it is investigating “fairness” of profits in the food sector, and how equitably profit and risk are shared throughout the supply chain. 

The government stressed that any price caps would not be compulsory. 

A spokesperson said: “Any scheme to help bring down food prices for consumers would be voluntary and at retailers' discretion.”

It added: “We know the pressure households are under with rising costs and while inflation is coming down, food prices remain stubbornly high. That’s why the prime minister and the chancellor have been meeting with the food sector to see what more can be done.”

☛ Want to stay up to date with the news? Sign up to our daily bulletin.

CIPS Knowledge
Find out more with CIPS Knowledge:
  • best practice insights
  • guidance
  • tools and templates