UK food and drink makers cut prices for the first time in more than three years – hope Britons will soon see box office prices fall
- Prices paid by food wholesalers and retailers have fallen for the first time since February 2020
- Food and beverage manufacturers themselves saw a second month of lower input costs
- They were one of the few sectors that also lowered their selling prices
British food and drink manufacturers cut prices in June for the first time in more than three years, passing on lower production costs down the supply chain, new research suggests.
According to the Lloyds Bank UK Sector Tracker, ‘factory gate’ prices paid by wholesalers and retailers have fallen from the previous month for the first time since February 2020.
The UK food and drink industry reported a reading of 49.4 on its tracker export cost measurement last month, up from 60 in May, where a reading below 50 indicates price cuts.
Food manufacturers were one of a handful of industries to lower their selling prices last month due to supply chain improvements
The drop in factory prices comes as food and beverage manufacturers enjoyed lower input costs for a second consecutive month, while a further fall in global food commodity prices has also helped.
The Food and Agriculture Organization (FAO) price index, which tracks the world’s most traded food commodities, such as grains, dairy products and vegetable oils, fell further to 122.3 points in June, following a two-year low in May to have reached.
According to a separate new report from Which? food prices have risen sharply over the past two years, with some household favorites almost tripling in price.
The fall in factory prices offers some optimism about the rising cost of living, but demand could keep inflation “sticky,” according to Lloyds Bank.
Food and beverage manufacturers reported decreases in input costs and were one of the few industries to also reduce selling prices due to supply chain improvements.
Only chemical producers and manufacturers of cars and car parts also lowered their prices in June. A total of six sectors saw a decrease in input costs.
However, the number of companies reporting price increases due to strong demand increased in June.
This was particularly the case in the services sector, where the number of companies reporting price increases due to strong demand was more than 4.5 times the long-term average.
Nikesh Sawjani, senior UK economist at Lloyds Bank, said: ‘June data shows that more and more sectors are seeing a moderation in cost pressures, which – if sustained – could feed through to price reductions charged to customers.
However, any benefit this has in terms of future inflation trends could be offset by clearly still strong demand in some parts of the economy, which could lead to inflation being “stickier” than hoped.
“This will be a factor that will be a serious consideration for the Bank of England as it continues to deliberate on how much further interest rates should be cut in the UK.”
Annabel Finlay, Managing Director of Food, Drink and Leisure at Lloyds Bank, added: “Last month we saw food and drink manufacturing costs fall for the first time since 2016.
This has continued into June and can give businesses the confidence and financial footing they need to lower the prices they charge their customers.
This could be good news when it comes to the future direction of UK food price inflation. But it will probably be some time before any positive effect is visible on the price consumers pay at the checkout, and a lot could change.
In these volatile conditions, there is no guarantee that manufacturers’ input costs will continue to fall.’
In May, MPs launched an inquiry to determine whether some players in the UK food supply chain are ‘unjustly’ benefiting from rising food prices in a comprehensive ‘farm to fork’ inquiry.
In addition to the investigation into ‘greed’, the Netherlands Competition Authority also checks whether prices are displayed clearly and honestly at supermarkets.