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The UK government says it is meeting with food bosses over higher prices – but denies it will impose a cap

People go shopping at a supermarket in Manchester, Britain, on March 22, 2023. The government is reportedly in discussions with supermarkets about voluntary price caps on certain items.

Xinhua News Agency | Xinhua News Agency | Getty Images

LONDON – The UK government said it is engaging with the food sector amid efforts to ease inflation-induced stress on British households – but dismissed the possibility of mandating price caps on supermarket goods.

A government spokesperson told CNBC by email, “The government is not considering imposing a price cap. Any plan to help bring down food prices for consumers would be voluntary.”

“We know that households are under pressure with rising costs and while inflation is coming down, food prices remain very high. This is why the Prime Minister and Chancellor are meeting with the food sector to look at what else can be done.”

The Sunday Telegraph quoted sources as saying on Saturday that aides in Prime Minister Rishi Sunak’s office have begun working on a plan that would see supermarkets voluntarily charge the lowest possible amount for certain items.

Asked in an interview with the BBC on the possibility of supermarket price caps on basic food items, British Health Secretary Steve Barclay said the government “wants to have constructive discussions with supermarkets about how we work together, any compulsions”. not about.”

Such a proposal would mirror efforts already made in France. A group of major French supermarkets agreed in March to cut prices on basic items and set a 10% cap on average price increases due to input costs. Retailers can choose which items to cut prices on.

French Finance Minister Bruno Le Maire later said that he would “use all the powers at my disposal to ensure that large industrial companies pass the shortfall.” [in wholesale prices],” Reuters reported.

Food prices remain firm in the UK. Headline consumer price inflation in the UK eased from 10.1% in March to 8.7% in April, mainly due to a fall in energy prices. But inflation for food and non-alcoholic beverages proved more resilient, coming in at 19.1% in April, almost steady at March’s 19.2%. The Office for National Statistics said it was the highest rate for more than 45 years.

The UK’s economic outlook has brightened somewhat, with the Bank of England and the International Monetary Fund saying they no longer predict recession this year.

However, the British are also grappling with the effects of fixed interest rates, as pressure on the central bank to continue hiking remains high. Many analysts and economists raised their expectations for the BoE’s top rate last week to 5.25% or even 5.5% from the current rate of 4.5%.

BoE Governor Andrew Bailey said earlier this month that the UK was battling “second round” inflation – in which initial price shocks cause businesses to raise prices and workers to gain wage increases, which could could potentially create a spiral that could make inflation sticky.

Corporate profits have come under scrutiny as people grapple with the cost of living. Supermarket profits were down in the first quarter, with many large firms saying they had offset most of the increase in input costs.

In January, the chairman of Tesco, one of Britain’s largest supermarket chains, said it was “entirely possible” that some food companies were profiting from inflation to protect their own margins, and some The business “fell” its supplier on this issue.

Andrew Opie, director of food and sustainability at the industry group British Retail Consortium, said any supermarket price cap would “make no difference to prices,” which he attributed to “increasing energy, transport and labor costs.” Also, higher prices are paid to food manufacturers and farmers.”

The OP said, “Instead of recreating the price controls of the 1970s, the government should focus on reducing red tape so that resources can be directed to keeping prices as low as possible.”

CNBC has contacted the supermarket for comment.

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