Rishi Sunak's supermarket price cap plan 'won't make a jot of difference', BRC says

Man shopping in a supermarket while on a budget. He is looking for low prices due to inflation. He is living in the North East of England and is using his mobile phone to check his shopping list.
Rishi Sunak's plans for supermarket price caps have been met with scepticism. (Getty Images)

Rishi Sunak's plan to encourage supermarkets to cap their prices of everyday staples won't make a difference to shoppers, industry leaders have warned.

With food price inflation in the UK reaching a staggering 19.1% in the year to March - the highest rate in Western Europe - the prime minister is understandably eager to bring the figure to a sustainable level.

Downing Street is understood to be drawing up an opt-in scheme, based on a similar model in France, which would see retailers asked to charge the lowest possible amount for some basic products including milk and bread.

While none of this would be mandatory, the plan has been met with deep scepticism by the British Retail Consortium (BRC) who have compared it to "1970s-style price controls".

Yahoo News understands that ministers are yet to meet with supermarket bosses to discuss a price cap scheme and that retailers believe such a plan would be "meaningless and ineffective".

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Supermarket inflation UK (PA)
Food inflation remains sky-high, but is showing signs of coming down. (PA)

In a statement Andrew Opie, Director of Food & Sustainability at the BRC, 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. Yet despite this, the fiercely competitive grocery market in the UK has helped to keep British food among the most affordable of all the large European economies.

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

"As commodity prices drop, many of the costs keeping inflation high are now arising from the muddle of new regulation coming from 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."

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UK inflation rate (PA)
Overall inflation in the UK finally came down from double digits in April. (PA)

A Food and Drink Federation spokesperson added: "Food and drink manufacturers are very concerned about stubbornly high food price inflation, and particularly the impact on low income households.

"However the disruption of the last few years has been significant, and the combined impact of covid 19, the war in Ukraine and Brexit have driven up prices across the board.

"Manufacturers continue to do what they can to limit price rises to consumers, which are always a last resort. However, their costs have gone up so much - for ingredients, energy, labour, packaging, logistics and so on - that it simply is not possible not to pass some prices rises on.

"What's making the situation worse is expensive and inefficient recycling regulation, friction at the UK’s borders and persistent labour shortages, where we would welcome constructive engagement by government if they are serious about keeping particularly the lowest-priced foods affordable for everyone."

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Sunak's proposal could mark the biggest intervention on pricing since controls introduced by Edward Heath in the 1970s, the Sunday Telegraph reported. However, No 10 has stressed any scheme would be voluntary.

Asked about the plan on the BBC's Sunday With Laura Kuenssberg programme, health secretary Steve Barclay said: “My understanding is the Government is working constructively with supermarkets as to how we address the very real concerns around food inflation and the cost of living, and doing so in a way that is also very mindful to the impact on suppliers.”

Barclay acknowledged small family-run businesses would themselves be under “significant pressure” and stressed that the plans were “not about any element of compulsion”.

Others have concerns about how these measures could affect food producers, with farmer and author Joe Stanley tweeting: "Another remarkable economic intervention from a ‘non-interventionist’ Tory government.

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"These price caps will be dropped like a grenade on farmers/producers by the retailers. Yet still govt piles financial pain on farmers, undermining UK food production."

Dan Crossley, executive director of the Food Ethics Council, asked: "How would this work in a way that doesn’t stitch up farmers and producers?"

However, some Labour Party figures thought Sunak's suggestion doesn't go far enough. Former shadow chancellor John McDonell tweeted: "Been calling for price controls on basic food stuffs & rents for 18 months.

"Fear a voluntary agreement limited to only a few foods will just be an ineffective publicity stunt. Labour has opportunity now to seize the initiative on controlling prices & rents."