Tesco and Sainsbury's issue statements as price of certain foods soars

The price of products we all buy from major supermarkets is set to rise, they have admitted. Shoppers are set to face a steep rise in the cost of fruit and vegetables following the recent Budget tax raid.

Two supermarket giants, Sainsbury's and Tesco, have issued statements acknowledging the anticipated price hike. It comes after Rachel Reeves, in her first Budget in October, introduced tax rises amounting to £40 billion - including an increase in the rate of employer National Insurance contributions.

This, coupled with a rise in the minimum wage, could push up the cost of growing fruit and vegetables by 10 to 12 per cent, warns the British Growers Association (BGA).

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Suppliers, already grappling with new National Insurance changes, are unlikely to be able to absorb the increase themselves. The same is true for supermarkets, who are expected to pass on at least some of the burden to their customers.

Both suppliers and supermarkets have already been hit by rising energy prices and increased fertiliser bills over several years. Sainsbury's, which previously warned that the Budget would cost them an extra £140 million, has admitted it is feeling the financial strain.

CEO Simon Roberts said on Friday that the chain would need to work closely with its suppliers to minimise the impact on customers. He told The Grocer: "Suppliers have got costs coming at them as well, of course, given all of the changes in National Insurance coming. We’ll be working really closely to make sure that between us, we find the best answers we can and we continue to give customers the best value that we possibly can."

Tesco and M&S are the first supermarkets to acknowledge the challenging times ahead, with both CEOs promising to protect customers against looming economic challenges. The BGA believes that retailers should bear most of the increased costs for fruit and vegetables, as growers have already postponed investment due to low returns.

Suppliers and supermarkets are reportedly already in dispute over these additional costs. The UK's largest chicken supplier is trying to pass on the full cost increase to its supermarkets, which could amount to at least an extra £30 million per year, according to the Sunday Times.

Food inflation reached a peak of 19.2% in March 2023 but has since dropped to around 1.9%. This indicates a decrease in the rate of price increases rather than a reduction in food prices.

Some groceries are cheaper than last year - such as pasta, rice, flour, chicken, frozen fish, cheese, and yoghurts - but most items are still increasing in price, albeit at a slower pace. The Bank of England predicts that food prices will only rise by 1.1% throughout 2025.

However, many experts consider this estimate to be optimistic, with pub chain Wetherspoons warning that food and drink prices will have to increase. The British Retail Consortium has forecasted that food price inflation could reach 4.2% by the end of the year.