Ocado CEO Tim Steiner accused Prime Minister Rachel Reeves of raising tax increases in grocery prices, warning that it is “unrealistic” to hope businesses absorb a significant increase in labor costs without passing it on to consumers.
Steiner said higher employers national insurance contributions and minimum wages increased by 6.7%, exacerbating price pressures for food retail and distribution after the annual inflation rate rose to 3.6% in June.
“I’m surprised to see inflation coming soon? Of course not,” he said. “You can’t increase the cost of labor in food production, food distribution and food retail, the increase in national insurance and the increase in minimum wage in the way we have, rather than expecting price increases. If anyone had it, it would be a totally unrealistic expectation.”
Food inflation rose from 4.4% to 4.5% in June, complicating the impact on households already increasing grocery bills.
Retailers and industry groups warn that as companies increase their labor and input costs, fiscal measures announced on the shelves will inevitably lead to higher prices on the shelves, which will inevitably lead to higher prices on the shelves.
Despite the pressure, Steiner insists that the Ocado retail industry (an online grocery joint venture with Marks & Spencer) is working to keep prices under control.
The company said the average customer basket value rose only 0.7% to £124.19 for the six months ended June 1, and the company said the average commodity price rose 1.4%, well below the national food inflation rate.
“It’s not good to make people more expensive,” Steiner said.
His comments were posted on the financial results reported by Ocado Group, with profits of £612 million in the first half of the year compared with a loss of £153 million in the same period in 2024. The swing is driven in large part by the reassessment of its shares in Okado Retail.
Revenue from the group’s technology solutions business sold warehouse automation systems to retailers around the world, climbing 13.2% to £674 million. Sales in the UK retail sector rose 16.3 per cent to £1.53 billion, although the sector lost £25 million after tax.
Industry experts responded to Steiner’s warning that rising input costs are causing retailers to hit the ground. Balwinder Dhoot, director of the Food and Beverage Federation, said:
“The pressure on food and beverage manufacturers continues to build. Many key ingredients, such as chocolate, butter, coffee, beef and lamb prices (also high energy and labor costs), are gradually entering prices, and shoppers pay on farming.”
Steiner also spoke with Marks & Spencer about the ongoing payment dispute of £190 million and called the conversation “constructive”. M&S retains this payment in a legal line related to the joint venture that does not meet performance goals.
“We have a very strong working relationship with them and have spent a lot of time with them over the past few weeks,” Steiner said.
He added that Ocado has seen “very little, if any” disruption in recent cyber attacks affecting M&S systems.
Investors welcomed the results, Ocado shares rose more than 12% when the market opened on Thursday.
As inflation, taxes and wage costs continue to squeeze profit margins, government political and economic pressures are intensifying, especially when rising food prices directly affect millions of consumers and voters. With speculation further tightening of fiscal in the prime minister’s next budget, retailers warn that affordability could be the next crisis on the streets of Britain.
