Tesco warns of increasing food costs

While the exit impacts of the “Brexit” are still to be determined, there are more people as well as companies talking about an increase in the cost of living that many UK families may be threatened with. The latest warning comes from Tesco, and they are talking about a major increase in the cost of food.

It is not just the price of food that may be, or is, going up. When looking at all expenses families need to pay, the government also shows that the cost of living increased in September 2016 at a two year high. Everything from fuel to food, clothes, and more are increasing at a higher rate.

If inflation increases as Tesco claims this will impact the average families monthly grocery bill. Any increase in grocery bills will hurt shoppers of all incomes, but the brunt of the damage will be to families on a low income, pensioners, people on benefits, and other hard-up households. Tesco for one is already starting to pass on these increases in the cost of food input prices, and they are passing them down to shoppers.

Reasons for food price increases

One of the reasons for higher food costs is the decrease in the value of the pound due to the Brexit. It has now declined (depending on the day of the week) from 15 to 20 percent. This decline leads to increasing input costs by many companies that are based in the UK. If a corporation has higher input prices, they always go and pass that on in the prices of their goods, such as food, groceries, and other bills.

Another reason is that manufactures also have higher input costs. Just a few weeks ago there was a row between Tesco and Unilever, which is one of the world’s largest consumer product companies. Unilever is supplier to supermarkets of everything from tinned food to beauty products, cleaning supplies, margarine, and much more. The company was trying to pass on a price hike of 10% on Marmite to Tesco, and this caused a row to develop between the companies. So Unilever tried to pass those costs to Tesco, and ultimately to shoppers.

Options for shoppers

The official government inflation numbers show that food deflation has been ongoing for over 2 years. But it is expected to soon end. As that deflation was caused by a supermarket war in which different stores were trying to bring in more shoppers; so they lowered prices. But the pound decline may put an end to that. The increases will cause more people to be facing a hardship, and they are turning to local food banks.

The increasing costs of food are bound to hit families on a low income the hardest. The increasing inflation is hitting them at the same time as many are having their benefits cut or frozen. It is estimated that over 1 million households may fall further into food poverty due to these two issues.

While charities, such as Trussell Trust, will try to step in to fill the need of the vulnerable, there is only so much they can do. While there are over 400 distribution centres across the UK as of October 2016, clients of the food bank are only given a small emergency parcel of groceries. Trussell Trust also relies on donations from the community, and if families are struggling to buy their own groceries, that may lead to a decline in items given to Trussell Trust. But even though the charity assistance may be limited, it may be the best option for a family.