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UK Food Businesses Grapple with Slow Recovery from Inflation Spike

The CGA Prestige Foodservice Price Index (FPI) has highlighted a gradual decline in food sector inflation over the past six months, with November marking a decrease to 15%, the lowest rate since July 2022. However, this decline has been notably slower than the previous rapid increase, which saw inflation peak at 22.9% in December 2022.

The inflation rate took a mere four months to surge from 15% to its peak, but a lengthy eleven months to revert to this level.


James Ashurst, client director at CGA by NIQ, commented on the sluggish reduction in inflation, stating, "After such rapid rises in inflation in recent times, it’s frustrating to see a much slower journey back towards more normal levels. The general UK rate of inflation may be coming down, but businesses across the food supply chain will be feeling the heat on prices for some time to come."


In November, the FPI showed that only two categories, oils and fats (1.4%) and dairy (8.8%), experienced inflation rates below 10% year-on-year. This is in stark contrast to the vegetable sector, where inflation remained extremely high at 27.3%. Ashurst pointed out the concerning rise in vegetable costs, particularly as the new year unfolds.


The prolonged high inflation in the food sector poses significant challenges for businesses, especially small and medium-sized enterprises. These businesses often have less capacity to absorb increased costs, making them more vulnerable to price fluctuations.


The situation is further complicated by the ongoing global economic uncertainties and supply chain disruptions, which continue to exert upward pressure on food prices.


The impact of these price increases extends beyond the food industry, affecting consumers' purchasing power and overall spending habits. As households adjust to the higher cost of living, there is a potential knock-on effect on the hospitality sector, with consumers likely to reduce discretionary spending, including dining out.


Looking ahead, industry experts suggest that businesses should brace for continued volatility in food prices.


Strategies such as diversifying suppliers, exploring alternative ingredients, and investing in efficiency improvements may help mitigate some of the impacts.


However, the path to stabilising food prices remains uncertain, with several factors, including geopolitical tensions and climate change, influencing global food markets.

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