Developing

Record Fuel Costs Making Food More Expensive

Record fuel costs and the threat of drought are pushing up the price of groceries in the UK.

Food costs were 5.4% higher in March, according to the British Retail Consortium ( BRC ) and analysts Nielsen.

In February, the figure was 4.2%.

An 11% jump in the cost of oil this year has driven up transport and manufacturing costs, which both contribute to food inflation.

Threats of a fuel strike by distributors and panic-buying have also helped push up petrol prices to record levels.

On top of that, some areas of the UK are experiencing their driest conditions for decades, prompting farmers to warn that poor agricultural conditions could raise food prices further this summer.

A hosepipe ban is due to begin in the South and East of England at midnight tonight.

The BRC also revealed that non-food prices fell by 0.9% in March - the biggest drop for more than two years, mainly because of widespread promotions on electrical goods, clothing and footwear.

Stephen Robertson, BRC director general, said: "Weak demand for many goods means retailers continue to battle hard for consumer spending by keeping prices down wherever possible."

Overall, shop prices rose by 1.5% last month, compared with 1.2% in February.

Mike Watkins, senior manager of retailer services at Nielsen, said: "Consumers are having to cope with falling disposable incomes with fuel and household energy costs also increasing since the start of the year.

"With inflationary pressure continuing in the food supply chain we can expect supermarkets to keep a strong focus on promotional activity over the next few months.

"Shoppers are following the deals and will continue to seek out the best value for money."

Experts have warned that the cost of vanilla ice cream could rise by as much as 10% this summer after poor vanilla pod crops in both Mexico and India.

Vanilla is the second most expensive spice in the world after saffron because it is so labour-intensive.