The most frequent justification for the price increase remains the consequences of the Corona pandemic and the economic repercussions of the war in Ukraine and the accompanying developments, in particular with regard to the increase in gas prices, the shock on supply chains and disruption of commodity supplies, including wheat and oils.
Despite the onset of the relative decline in world prices, food commodities in Britain have turned their backs on it, as highlighted in a report recently published by the British newspaper “The Guardian” under the title (Why the Food prices in the UK continue to soar and when will it stop?
The report says gas prices are now lower than they were before the war and world food prices have also fallen sharply, according to the Food and Agriculture Organization of the United Nations. so that in April, its food index decreased by 19.7% compared to the year 2022.
This mismatch lends credence to the notion of “greed inflation”: companies that use inflation as an excuse to increase their profit margins, which Sharion Graham, General Secretary of Unite the Union, has commented on, claims that the UK is “in the grip of a winning crisis”. The LDP recently called on competition authorities to open investigations.
The Bank of England said last week that its network of agents across the country had found that falling costs at some businesses ‘were not automatically being translated into consumer prices, in an effort to rebuild profits “. This is why the Competition and Markets Authority must examine whether supermarkets and food conglomerates are making excessive profits. Last week, MPs on the Environment, Food and Rural Affairs Committee announced an inquiry into “fair food prices”. The business owners are defending themselves, arguing that “some chains have given their employees multiple pay raises over the past year, which means the industry’s payroll is rising.”
Supply and demand mechanism
For her part, Elizabeth Carter, an academic specializing in European affairs, an assistant professor at the University of New Hampshire, claims in exclusive statements to “Sky News Arabia Economy” that the rise in prices in the United Kingdom in this way has come for several big reasons, including the effects of the Corona pandemic. , especially since many companies raised their prices after the return to activity in an attempt to recover (and offset profits) after the closure, while these companies did not reduce their prices once the resumed activity.
The second factor, according to Carter’s estimate, is related to the repercussions of the war in Ukraine, in particular with the increase in oil prices, so that these additional costs affect various economic sectors, and with many actors using these crises (post-pandemic recovery, high energy prices) to justify higher prices.
“There is a dominant idea in contemporary economics that prices are determined by the intersection of supply and demand,” she says. “But things don’t really work that way in practice, because how can you as an individual producer estimate demand? do you do instead of So take a look at your competitors’ prices.
She applies this to the current scene in Britain, saying: The issue of price increases, which lead to higher rates of inflation and then higher interest rates to curb inflation, is not is not an “increase in demand”, nor the cost of increased wages. The problem lies with companies that increase their prices in this way. So, dealing by raising the interest rate somewhat misses its main purpose.
Since December 2021, the Bank of England has raised rates 12 times so far, reaching their highest levels since 2008. Last Thursday, the Bank announced a 25 basis point hike in interest rates to 4, 5%. The Bank of England’s latest move was in line with previous expectations, as part of its efforts to contain inflation, which remains the highest of all advanced economies. The Bank of England has announced that it “rules out a recession in the UK economy”.
Food industry experts say rising energy costs and supply chain disruptions caused by the war in Ukraine remain the main driver of rising prices, along with labor costs work and the impact of the climate crisis on crops. Among the most important reasons, according to the Guardian report.
The suffering of the British economy
Britain’s economy is suffering major challenges with high inflation and falling growth rates as Britain is the only Group of Seven country that has not returned to conditions before the outbreak spread from Corona.
Energy prices
The aforementioned British Guardian newspaper report, quoting IGD food industry analyst chief economist James Walton, said:
A lot of things that were fueling inflation at the start of last year, like energy prices, are actually coming down, which will bring inflation down in general.” However, that hasn’t been the case in the food markets. The reason for this is that the cost of the staple foods themselves, such as soybeans, coffee, wheat and barley, they remain high.. It takes a long time for the changes in the cost of food at the top of the supply chain are passed on to us as consumers buy and sell using long-term contracts, which means the price is only adjusted when it is finished and renegotiated.
Despite this, he points out, “in the UK it is not uncommon for food prices to fall”.
The cost of living crisis
For his part, Mustafa Ragab, a political researcher in London, said in exclusive statements to the “Sky News Arabia Economy” site: “The British government is aware of the certainty that the majority of the population is suffering from inflation and has become unable to cope with the burdens of life, so municipalities thrive in attempts to raise awareness of economy in use and reuse.
A member of the British Labor Party adds: “Nevertheless, we live in a society full of material contradictions, as food and specialty shops – especially the big ones – follow malevolent tricks which seem to reduce the prices of certain products and increase the prices of many other products, until people here realized this trick, and they started buying their needs in several stores.
And he talks about many companies that are following the same approach and making huge profits from price increases, pointing out that prices have risen insanely in tough economic conditions, and with corporate greed in this way, in particular that “we live in a free capitalist society”. society that has no control, some have exaggerated the doubling of the prices of goods, and the British have no choice but to watch the prices before buying and to stop buying more than they can afford. Some car owners even leave their cars and resort to public transport due to high gasoline prices. However, transport prices too, are not the same price as before.
The International Monetary Fund earlier raised its forecast for Britain’s economic performance in the current year 2023, from previous expectations of a contraction of -0.6% to a contraction of -0.3% in the last report. While the Fund believes that the scene in general does not look promising for London.
Britain has an inflation rate that is “the highest in Western Europe”. The country’s consumer price inflation rate was 10.1% in March, down slightly from 10.4% in February, according to data from the UK Office for National Statistics. Food and non-alcoholic beverage prices rose 19.1% year-on-year in March (the biggest increase since August 1977).
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