Aldi warns Budget measures could push food prices higher

Aldi's UK chief executive said measures in the upcoming Budget that raise costs for employers risk being passed on to shoppers, warning that any additional levies could drive food prices higher.

Giles Hurley told the BBC that the impact of last year’s rise in National Insurance contributions and the cost of new packaging rules had already "rippled through to prices on the shelf edge" across the supermarket sector. More than 60 retailers wrote to Chancellor Rachel Reeves last month urging the government not to impose further taxes on the industry.

Aldi reported annual sales of £18.1 billion but said pre-tax profits fell by more than a fifth to £435.5 million, a decline the company attributed largely to investment in price cuts, store infrastructure and higher pay. Hurley said Aldi had committed more than £300 million so far this year to offset rising costs and keep prices low for customers.

Even as Aldi and other supermarkets absorb some costs, many staples have become markedly more expensive. Hurley cited the example of a 500g pack of lean beef mince, which industry figures say has risen from about £3.79 at the start of the year at several large chains to more than £5 at major supermarkets. He pointed to a near 30% rise in cattle prices and shrinking herd sizes as contributors to that move.

Global commodity movements have played a substantial role in food inflation, Hurley said, but he added that some domestic policy decisions had "perhaps inadvertently" contributed to a more persistent inflationary picture in the UK than in some other developed economies.

Official and industry data show the UK has experienced higher food inflation than parts of the EU. UK food inflation was 4.9% in July, compared with a Eurostat figure of 3.9% for the EU. The Food and Drink Federation (FDF) warned that food inflation could reach 5.7% by the end of December and remain around 3.1% by the end of 2026. The FDF has identified the rise in the minimum wage and higher employer National Insurance costs as the main drivers of current UK food inflation, and estimates the new packaging rules will add roughly £1.1 billion in costs for food and drink businesses from next month.

The Bank of England has also cautioned that a new levy on retailers intended to reduce packaging waste could push food prices higher in the autumn. Hurley urged clearer support and greater certainty for British farmers, saying boosting domestic production could help reduce inflationary pressures in the food system. "Ultimately, a resilient British food sector is utterly dependent on having a resilient British farm sector," he said.

The Treasury, in response to questions about potential Budget measures, said the chancellor's forthcoming Budget would "build an economy that works for working people," adding it would focus on bringing down inflation, keeping a tight grip on public spending and tackling the cost of living. The Budget is scheduled for 26 November.

Aldi said it is continuing to expand in the UK, operating 1,060 stores and planning to open another 80 outlets over the next two years backed by a planned £1.6 billion investment. The company's results underline the pressure on retailers to balance investment in growth and wages while attempting to shield customers from further price increases.