Food prices surge at fastest pace in 19 months as inflation holds at 3.8%

The UK food inflation increased to 5.1% in August, the highest in 19 months, as the prices of basic food items such as beef, butter, milk and chocolate continued to climb at a high rate.

The overall inflation rate remained at 3.8% which was almost twice the Bank of England's target of 2%. 

However, the food costs had seen a sustained rise.

Economists explain the continuing increase in grocery bills by the fact that businesses are transferring increased labour costs, such as the government-imposed increases in the National Insurance Contributions and the minimum wage, to consumers.

According to Yael Selfin, the chief economist of KPMG UK, the UK has become an outlier despite its inflation rate at 1.9% in UK, whereas in France and Germany, the inflation levels are 0.8% and 2.1% respectively.

Chancellor Rachel Reeves admitted that household life is strained, saying she is determined to reduce costs.

Nevertheless, the critics claim that the existing taxation policies are fueling inflation.

The British Retail Consortium emphasized that food prices are now growing at a pace faster than average wage growth of 4.7%, and this has also pushed family budgets tight.

Although certain groups, such as clothing, experienced a fall in prices as a result of seasonal bargains, the staple foods, such as cereals and pasta also reduced by a small margin.

However, certain products such as beef and veal increased by almost 25%, butter by 19% and chocolate by 15.4%.

Small businesses such as Coosh Bakery in Nottingham are under the strain, owned by Tom Egan who reported that the costs of cocoa have increased by more than 150% and the costs of butter have risen by 50% in the last year.

Inflation has been very persistent and there is still uncertainty about whether the interest rate will be further reduced in this year.