UK households are facing persistent cost pressures, highlighted by official figures showing the headline inflation rate holding steady at 3.4% in the year to May – the highest level seen in over a year. While this overall pace remained unchanged from April, the data revealed a sharper bite on consumers’ wallets, particularly when it comes to food, and most strikingly, chocolate.
The Rising Cost of Food
Food prices continued their upward climb for the third consecutive month in May, reaching 4.4%. This marks the highest rate of food inflation since February of the previous year. The sustained increase is prompting speculation among some economists that businesses are beginning to pass on recent cost hikes to customers. These include the increases in employer National Insurance payments and the higher minimum wage, both of which took effect in April following announcements in last October’s Budget. As Ruth Gregory, deputy chief economist at Capital Economics, put it, this trend “perhaps provides a tentative sign that firms are passing on more of April’s rise in National Insurance Contributions in their selling prices.”
Despite inflation remaining above the Bank of England’s 2% target, the central bank is not widely expected to cut interest rates from the current 4.25% level in the near term.
The Bitter Truth: Chocolate Prices Skyrocket
Buried within the inflation data was a particularly stark figure: chocolate prices surged by a staggering 17.7% in the year to May. This represents the sharpest increase since the Office for National Statistics (ONS) began tracking this specific data in 2016, setting a new record high.
The primary culprit behind this dramatic rise is significant disruption to cocoa production in key growing regions. Jonathan Parkman, head of agriculture at commodities broker Marex, points to severe bad weather in Ghana and Ivory Coast. These two West African nations are giants in the cocoa world, collectively producing well over half of the global supply. Compounding the weather issues are long-standing problems within the sector, including government mismanagement and a damaging surge in plant diseases. The outlook remains bleak for those with a sweet tooth; Parkman warned there is “little chance of a fall in chocolate prices this side of Christmas.”
Offsetting Pressures? Cheaper Travel
Offering a minor offset to the rising cost of food, travel prices saw a dip in May. Air fares, in particular, fell by 5% between April and May this year. This contrasts sharply with a 14.9% increase during the same period in the previous year. The ONS attributed this shift largely to the timing of Easter and school holidays, which impacted airline pricing differently compared to last year when Easter fell earlier.
The Real Impact: Squeeze on Households
These rising food costs are having a tangible impact on household budgets across the UK. Research from the Consumer Council in Northern Ireland highlights that food shopping now accounts for the largest share of “basic spending” for households there, making up almost a quarter (23%) – the highest level recorded in two years of monitoring. This data, compiled by Grant Thornton, underscores the pressure felt nationwide, particularly by low-earning households for whom food bills can exceed housing or energy costs.
Families are feeling the pinch acutely. One mother of three in Londonderry reported her weekly food shop for five has jumped from £70-80 a few years ago to £100-120 today, confirming it’s her biggest expense after her mortgage. She notes the prevalence of ‘shrinkflation’ – smaller product sizes for the same or higher prices – and has adopted strategies like buying more own-brand items, cooking from scratch, actively seeking out reduced ‘yellow sticker’ goods, and meal planning based on sales to cope. Staples like eggs, milk, bread, cheese, butter, and fruit have seen significant price hikes, alongside chocolate.
The strain is also evident among vulnerable groups like students and young adults. University food pantries are seeing high demand, assisting dozens of students daily who are struggling with food poverty. A recent survey of young adults (18-30) revealed alarming levels of food insecurity, with almost half fearing their food supplies would run out before they could afford more, and over two in five regularly skipping meals.
Business Challenges and Political Debate
The inflation figures also fuel the ongoing political debate surrounding the cost of living. Chancellor Rachel Reeves focused on government investment aimed at making working people “better off.” However, Shadow Chancellor Mel Stride described the figures as “deeply worrying for families,” attributing them to government policies he claims “tax jobs and ramp up borrowing,” stifling growth and driving up essential costs.
Industry bodies echo these concerns. Kris Hamer of the British Retail Consortium stated that retailers had warned that costs from the Chancellor’s Budget could not be fully absorbed and would inevitably lead to higher consumer prices. John Roberts, CEO of electrical retailer AO World, argued that taxing businesses and employment does not foster growth.
Small businesses are also grappling with the pressures. A coffee stand owner noted that while business is generally good, customers’ budgets are squeezed, with young families particularly cautious, price-checking and opting for packed lunches. Hidden costs, like card machine fees, add further pressure, making it difficult for small operators to absorb rising expenses or increase their own prices for fear of losing custom.
Looking Ahead: Potential Further Risks
The inflation outlook remains uncertain, with potential risks on the horizon. Concern exists that global oil prices could increase due to geopolitical tensions, specifically the conflict between Israel and Iran. Disruption to the Strait of Hormuz – a vital passage for a fifth of the world’s oil consumption – could lead to “surging oil and shipping costs,” warns David Bharier, head of research at the British Chambers of Commerce. He highlighted that many smaller businesses have limited capacity to absorb such additional pressures.
In summary, while headline inflation has held steady, May’s figures underscore the persistent upward trend in essential costs, particularly food and the unprecedented surge in chocolate prices driven by global supply issues. This continues to place significant pressure on household budgets and businesses alike, with potential future geopolitical factors adding to the uncertainty.
