City experts have warned that Britain’s supermarkets could face a government inquiry for raising food prices above the rate of inflation. The inflation in food prices has helped raise the inflation level to twice the official government target. Retailers have been quick to defend the rises blaming the weak pound and strongly deny any accusations of unfair price increases.

However with UK food inflation at 4.6% in February, compared to a Eurozone average of 1.5% there have been calls that action from politicians is needed.

Predictions by Swiss Investment Bank UBS are that all supermarkets are increasing their profit margins on food as customers are trying to cut back on bills.

“After two years during which processed food prices have been rising more than 50% faster than the associated costs and at a time when food prices have heightened political importance, it seems unlikely that this position will continue to be ignored.”

Analysts at UBS reported that “UK food prices are rising more rapidly than most other OECD economies’ food prices and have significantly outstripped food retailers’ cost inflation,”

They further suggested that “This could allow UK politicians to suggest that food price inflation is ‘unfair’ or ‘excessive’.”

The British Retail Consortium has counter argued that supermarkets, rather than pushing up prices have actually shielded customers from the full impact of global food inflation. In particular the price of grain tends to follow the price of oil with the huge dependency of agriculture on fossil fuel for their machinery and transport cost. With oil prices now moving closer to the record breaking £91 a barrel of 2008 and with the crises in Libya and the Middle East no closer to conclusion it seems that food inflation will not stabilise for quite some time