'Worst is still to come': Tesco chief warns food prices will continue to spiral

6 February 2022, 22:24 | Updated: 7 February 2022, 00:35

The worst of rising food prices is "yet to come" ahead of a potential five per cent increase in spring, the chairman of Tesco has said.

John Allan said food prices at Tesco grew by only one per cent in the last quarter but could rise by five per cent in coming months.

It comes amid the cost of living crisis, which is also set to see a surge in National Insurance and energy bills in April.

However, Chancellor Rishi Sunak previously warned that bills could rise again as soon as October, with the Government likely to have to step in with more financial support.

Speaking on the Sunday Morning programme, Mr Allan said: "Food is a relatively small part of household spending, it's only about nine per cent, that figure has halved in the last half century.

"But of course, it's a bigger proportion for those on the lowest incomes. So I think we're concerned particularly about what can we do to try to protect those who are hardest up, who are going to suffer most from that?

"And in some ways, the worst is still to come because although food price inflation in Tesco over the last quarter was only one per cent, we are impacted by rising energy prices; our suppliers are impacted by rising energy prices.

"So the likelihood is that that inflation trigger will rise but we're doing all we can to offset it."

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Mr Allan added: "I predicted last autumn that food prices by the spring might be rising about five per cent.

"I sincerely believe that it's not going to be any more than that, it might even be slightly less, but that's the sort of number we're talking about.

"But of course five per cent, if you're spending - as some of the least well-off families are spending - 15 per cent of your household income, is significant.

"It troubles us and I'm sure troubles many people that people may have to struggle to choose between heating their homes and feeding their families and that's clearly not a situation that any of us should tolerate."

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It comes after Andrew Bailey - the governor of the Bank of England - warned that inflation could hit 7.25 per cent by April and is unlikely to fall back to normal levels for two years.

The bank raised interest rates to 0.5 per cent on Thursday, with further rises also expected.

Previously speaking to LBC, former deputy governor of the Bank of England Sir John Gieve also said he believed another rise would be on the way soon.

"I'd be very surprised if there isn't," he said.

"And the markets now expect interest rates to go up to, say, 1.5 per cent by the end of this year.

"I think it could even go further."