A trip to the shops for some groceries is not for the faint-hearted these days. Everything from butter to bread, olive oil to oranges, costs an eye-watering amount.
Most of us will think, ‘How much?’ as we look powerlessly at the receipt and begrudgingly tap our bank cards at the checkout.
Even for those on a decent wage, it is hard not to feel robbed if you are handing over more than £4 for a pound of butter, or £1.40 for a tin of beans – in the ‘old’ days beans on toast used to be an economical dinner. Not any more.
As for luxury items, like chocolate and wine – these have become so pricey it’s not hard to lose your appetite (or your thirst!).
Indeed, anyone who has travelled abroad recently and enjoyed a decent bottle of wine for four euros in Spain or Portugal, will likely be left with a bitter taste when that same bottle costs twice as much in Northern Ireland.
Food prices in supermarkets aren’t likely to come down any time soon (Alamy Stock Photo)
But what exactly is making some items so dear, and how can you tell if you are being ripped off?
The Irish News financial columnist Peter McGahan unpacks the reasons behind high grocery prices in Northern Ireland and discusses whether or not those hefty price tags will ever come down.
“The truth is more complicated than simple profiteering (but there is that),” said Peter.
“Food prices in the UK have been pushed up by a mix of global shocks, domestic costs, and market structures that make Britain particularly expensive.”
This brand of coffee costs £8.25 in Sainsbury’s
Energy and fuel costs
Food doesn’t just grow in fields – it travels, gets processed, packaged, and refrigerated. Energy prices feed into all of this.
The war in Ukraine in 2022 cut Europe off from cheap Russian energy. Britain, which relies very heavily on imported gas, was left exposed to soaring world prices. That cheaper energy is now flowing elsewhere – Russian pipelines are pivoting towards China and Mongolia, while the UK and Europe import more costly American gas instead.
Energy is the invisible ingredient in every item on a supermarket shelf. From fertiliser to tractors, shipping to cold storage, higher energy costs rocket through the whole chain and land in the weekly shop.
The weak pound
Since the Brexit referendum, sterling has been weaker against the euro and the dollar,” said Peter.
A weaker currency makes imports more expensive – and the UK imports nearly half its food. Spain, by contrast, grows much of its own fruit and vegetables, so it doesn’t face the same exchange-rate penalty.
Energy is the invisible ingredient in every item on a supermarket shelf.
— Financial expert, Peter McGahan
Labour shortages
Farmers and food processors across the UK have struggled to recruit workers since Brexit ended free movement.
Shortages of pickers, abattoir staff, and HGV drivers have pushed up wages in those sectors. While better pay is good for workers, it also means higher costs that filter through to shop prices.
Olive oil priced at £7 in Tesco
Supermarket competition – or the lack of it
In Spain and Portugal, discount chains like Mercadona and Lidl dominate, keeping margins tight.
The UK also has Aldi and Lidl, but the market is still led by Tesco, Sainsbury’s and Asda. These giants have strong power over suppliers, and critics argue this creates a “price umbrella” where branded goods in particular – like cereals and coffee – stay much higher priced than in continental Europe.
Read more: Food inflation to hit 5.7% as suppliers can ‘no longer absorb’ costs, FDF warns
Debt, rents, and finance costs
UK supermarkets and suppliers face higher property and finance costs than many continental rivals. That burden gets baked into the price of groceries.
Because we are struggling, and the central bank has decided to increase interest rates to calm things, we go to our employer and ask for a wage rise. They agree, but pass that on to their customer, who passes it on to theirs, and we complete the spiral. The businesses also have higher borrowing costs and pass that on to the customer.
Are we being ripped off?
Nobel-winning economist Joseph Stiglitz calls this “sellers’ inflation” – when big firms use a crisis to raise prices faster than their costs,“ said Mr McGahan.
Economist Isabella Weber explains the process in three stages:
Impulse: Something big happens that pushes up basic costs – for example, oil or gas suddenly gets much more expensive. The companies selling that oil or gas make extra profits.
Propagation: Other businesses further down the chain – like food manufacturers and supermarkets – see their bills go up. They raise their own prices, sometimes more than they need to, so their profits don’t fall.
Conflict: Ordinary people now face higher prices in the shops. They ask for higher wages just to keep up. That, in turn, can push businesses to lift prices again.
It’s a chain reaction: a shock at the top spreads through companies and finally lands on workers and shoppers, keeping prices high.
The stock market reflects this. Since October 2022, Sainsbury’s share price has climbed 83%, while Tesco has 120%. Read into that what you may.
This pattern is strongest in concentrated industries where firms shadow each other’s moves rather than compete them down.
UK grocery prices are high because the country is unusually exposed to global shocks, carries heavy domestic costs, and has weaker competitive pressure than southern Europe.
It isn’t just profiteering – though some brands have taken advantage – but a combination of energy dependence, a weak pound, labour shortages, finance costs, and corporate pricing power.
Of course, what everyone wants to know is if those hefty price tags are likely to come down anytime soon?
Sadly, the outlook isn’t good.
“Grocery prices in the UK aren’t likely to fall soon. Mainstream economists expect slower inflation, but not cheaper food,” said Mr McGahan.
“The £4 cereal box is here to stay. It is only with a move to squeeze energy companies and their profits that we will see those prices fall, but that has been known for some time and nothing has happened at government level.”