UK food and energy prices are rising twice as fast as those in Europe, report finds

Power and food bills in the UK are rising at twice the rate they are in the European Union. 

A report from the Organisation for Economic Cooperation and Development yesterday showed that British bills surged at the fastest rate of any EU nation in October. 

Energy costs rose by 24.2 per cent compared with the same time last year, the OECD said.



That was twice the gain in Finland, which recorded the second highest rate of power price inflation.

And UK grocery bills gained 10.1 per cent, a rate matched only by Finland.

Across the EU, the average for food inflation was 5.5 per cent, while energy costs were up 11.7 per cent.

The OECD figures prove that UK consumers are still being hit hard by a rising cost of living despite the economic downturn.

The official rate of inflation, currently 4.5 per cent, has come down from a high of 5.2 per cent in September, partly because of the fall in the price of oil and the discounting of goods such as computers and DVDs.


Experts have been warning that the UK could face a bout of deflation - the opposite of inflation - as firms aggressively slash prices.

But so far there is little evidence of this in the official figures.

They suggest that some firms are rebuilding profit margins by refusing to pass on reductions in the costs of their raw materials.

Energy giants lifted their prices after the cost of a barrel of oil soared to nearly $150 a barrel over the summer.

Since then the cost of energy paid by utilities has dropped along with the precipitous decline in crude prices.


But this has yet to be reflected in bills, the OECD figures showed.

Richard Haddelsey, of energy analysts McKinnon & Clarke, said UK utilities are much quicker to pass on gains in wholesale costs of gas and electricity to consumers than rivals on the Continent.

Yet prices are often slow to come down afterwards.

That is partly because the UK has less gas storage, making it hard for utilities to stockpile gas during periods where prices are low.

But he said wholesale energy costs have tumbled recently, so utilities ought to start passing reductions on to customers.

'Wholesale prices are the lowest for 12 months or more, and that is already having an impact for industrial and commercial energy customers,' he said.

'It will take longer to filter through to domestic customers.

'But you would expect to see domestic price declines in the coming months to reflect the way the oil price has fallen back.'

The rapid gains in food prices fly in the face of assurances by supermarket giants that they have been easing the pain on consumers.

UK super-markets have been accused of ' fattening up' their profits despite the falling cost of raw produce on agricultural markets.

The Daily Mail's own Cost of Living Index showed that food price gains recorded in October continued into November.

The price of a typical shopping basket leapt by 21.3 per cent in November, adding more than £1,100 a year to family grocery bills.
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Family food shopping bill goes up by £50 in a month

Food prices rose at the fastest pace for 18 months in June, pushing up the cost of shopping for families by more than £50 in one month alone.

The cost of groceries rose by 1 per cent last month and is now 7 per cent higher than in June last year, figures from the British Retail Consortium (BRC) show.

The average yearly food bill for a family of four is now £360 more than this time last year.

Shoppers who buy curries or pasta dishes will be hit harder, as the cost of some popular items have risen by far more than the average. The cost of a 1kg (2lb 2oz) bag of basmati rice has nearly doubled over the past year, according to mysupermarket.com, the supermarket price comparison site, while the cost of a 500g bag of fusilli pasta has risen by more than 110 per cent, or 42p.

A loaf of white bread is now 20 per cent more costly at 65p, while the price of butter has risen by 62 per cent.

Stephen Robertson, the director-general of the BRC, said that the average increase in food prices was modest compared with agricultural prices, which have risen between 60 and 80 per cent over the past year.

“Although their own costs are going up, food retailers are running high-profile price cuts and promotions.

They are keeping prices to customers down by cutting costs and increasing sales,” he said.

There were fears, however, that the 1 per cent jump in food prices in June, along with the first increase in the price of nonfood items such as clothing, footwear and electrical goods since December 2006, could herald further rises as retailers begin to pass on increased costs to customers.

Prices of all retail goods rose by an average of 2.5 per cent compared with May last year, up from 1.8 per cent in April, although the BRC points out that this is still lower than the rate of inflation, currently at 3.3 per cent.

The figures still make worrying reading for the Bank of England’s Monetary Policy Committee, which will announce its decision on interest rates today, as it struggles to keep inflation under control. continues here