Tesco boss: food inflation has probably peaked but prices will stay high

The chief executive of Tesco has said food inflation has probably peaked but that prices are likely to stay high.

Ken Murphy, the head of the UK’s biggest supermarket chain, said the price of milk, bread, cooking oil and some vegetables such as broccoli had come down this month but inflation continued in other essentials, including rice and potatoes, as weather issues and locked-in increases in the price of labour and energy continued to bite.

A peak in annual food price inflation, currently at 19% according to the latest Office for National Statistics data, would not mean that prices overall would start to come down, just that they would rise more slowly.

He also called on ministers to consider easing business rates, which he said had cost Tesco £700m last year and had doubled in the past 10 years while grocery sales were largely flat.

“We would really welcome help in a number of different areas in ways that could help reduce the cost to serve” customers, he said.

He also said price rises would continue to ease in the second half of the year, but that it was difficult to determine how long high levels of inflation would remain because costs were partly dependent on commodities and the cost of energy, on which long-term contracts continued to suggest prices would remain high.

“We hope we will start to see an easing of aspects of inflation that will help to moderate [it]. It is unlikely prices will return to where they were but wages are higher than they were and what’s important is the purchasing power of families,” he said.

At Tesco’s annual shareholder meeting on Friday, Murphy defended the company’s recent move to charge extra fees for suppliers selling goods via its online business. He said grocery producers had been trying to “push through price rises” on a regular basis in the past year or so, and that Tesco had “actively been trying to hold them back”.