Submitted by: Maline Morgan

The supermarkets might spend a fair bit of their time worrying about retails insurance, but they have bigger problems on the horizon if the Government starts an investigation into recent food prices.

These have been dubbed by a major report just published as being excessive and unfair and will undoubtedly put retails insurance worries on the back burner for a few months.

The report has been prepared and published by Swiss Bank UBS and it concludes that UK price rises are rising more rapidly than in many other developed countries. What s more, the price rises do not reflect cost inflation levels that are being experienced in the marketplace.

News of this report will shock the public and Government alike; as many of the large retailers appear to blame additional costs onto the rise of raw material prices.

Highlighted in the report is the fact that figures from Eurostat (the official stats agency of the European Commission) show that UK food inflation, on an overall basis, is running at nearly 5% (4.9%) whereas the mainland European average is just shy of 2% (1.8%). And American food inflation is as little as 1.5%, with France recording just 1.4%.

The report said:

The UK does, however, stand out as being somewhat anomalous in experiencing significantly more consumer food price inflation than elsewhere. Looking at the perception of food price inflation, along with whether food price inflation is justified by cost pressures, the UK seems most likely to see political agitation over food prices.

UK food prices are rising more rapidly than most other OECD economies food prices, and have significantly outstripped food retailers cost inflation. This could allow UK politicians to suggest that food price inflation is unfair or excessive .

The report highlights the fact that UK bread and breakfast cereals alone have risen by 5.1% and quotes this as an example of consumer price inflation is outstripping domestic costs. Yet because this is not happening in other major economies, means that it will likely become a focus point of UK politicians.

The reports says about this:

Politicians may well feel justified in asking if everyone faces the same commodity price increases, why does the UK have so much more food inflation? It is not whether or not the price increases are justified, it is the fact that the price increases are anomalous that will likely attract political attention.

But supermarket defenders say that evenso, UK food prices are low when compared to other nations and that such reports do not take into account the widespread use of promotions and special discounting seen in all UK supermarkets.

Although important, it s likely that retails insurance will remain less in the spotlight than food inflation for the coming months.

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