Food price shock threatens Britain’s cafés and takeaways

Britain’s small cafés, pubs, takeaways and restaurants are facing another brutal squeeze as food prices start rising again. A surge in supermarket prices linked to the conflict in Iran and disruption to global supply chains is pushing up costs across the food chain. Already struggling with higher wages, energy bills, taxes and falling consumer spending, many small hospitality businesses fear this latest inflation shock could be the one that finally pushes them over the edge.

FOOD PRICES SURGE

Photo by Nathan Dumlao on Unsplash

The UK’s small cafés, takeaways and restaurants are bracing for a summer of pain

War in Iran sends costs soaring, supermarket prices jump, and small hospitality firms fear they won’t survive another squeeze

Supermarket food prices have shot up for the first time this year, flashing a red warning that Britain’s cost‑of‑living crisis is far from over. The country’s pubs, cafés, takeaways and restaurants, already under huge pressure from energy costs and wage and tax rises, could be the casualties.

A City AM analysis of nearly 200 everyday items across Tesco, Sainsbury’s and Waitrose found prices jumped 1.4% in June alone. That’s the sharpest rise in months and the first sign that the chaos in the Middle East is now hitting UK shelves.

If supermarkets are feeling the heat, the UK’s small and micro hospitality businesses, already on their knees, are about to get scorched.

War in Iran blows a hole in global supply chains

The conflict in Iran and the near‑closure of the Strait of Hormuz, one of the world’s most important shipping routes, has sent:

• freight costs soaring

• oil supplies plunging

• fertiliser prices rocketing

That means higher costs for farmers, producers, supermarkets, and ultimately every café, bakery, takeaway and restaurant trying to keep their doors open.

Economists now expect UK inflation to peak at 3.7%, but food inflation, which reacts fastest to energy and shipping shocks, is likely to go even higher.

Waitrose leads the price hikes and it’s a mixed bag for shoppers

City AM’s survey found:

• Waitrose hiked prices on nearly 40% of items

• Tesco raised prices on just under 20%

• Sainsbury’s on around 10%

Some staples such as tomatoes, chickpeas, oil, and mince, dipped slightly but cupboard essentials like ketchup, mustard and honey, are up.

Small hospitality businesses will take another hit

For Britain’s small food businesses: cafés, takeaways, chippies, pubs, and bakeries that keep our high streets alive, this is a nightmare scenario.

They’re already battling:

• soaring energy bills

• rising wages

• higher rents

• delivery‑app commissions

• falling customer spending

Now, with food prices rising again, many say they’re out of road. Every 1% rise in supermarket prices hits small hospitality firms twice: once in their own supply chain, and again when customers cut back.

GOVERNMENT PANIC AND A SCRAPPED PLAN

Chancellor Rachel Reeves reportedly considered supermarket price caps on essentials. After fierce backlash from supermarkets and economists, the idea was quietly binned. The Bank of England governor Andrew Bailey warned MPs that price controls would be “artificial” and “unsustainable”.

What this means for summer

Brace yourself, because if supermarket prices are rising now, hospitality will feel the hit within weeks. We can expect:

• higher menu prices

• smaller portions

• more venue closures

• more pressure on already‑struggling micro‑businesses

• customers cutting back even further

With inflation expectations rising, interest rate cuts are now off the table meaning there’s no relief expected on borrowing costs for small firms any time soon either.

Food inflation is back in the headlines and it’s bad news for everyone. For our small and micro hospitality businesses, it’s potentially fatal. Having survived Covid and energy shocks, they’re facing a summer of rising food costs which neither they nor their customers may be able to outrun.