The true cost of cheap food

As the fall-out from the horse meat scandal continues it has brought into focus the whole background to so called “cheap food”.

Notwithstanding the fact that passing off of horse meat as beef is basically a criminal act of fraud, it highlights the vulnerability of a market where prices are squeezed to the absolute and in order to protect margins suspect practices and questionable ethics will inevitably come to the fore.

The CEO of the Iceland Frozen Food chain has cited the purchasing policies of local councils blaming them for driving down food quality with cheap food contracts for schools and hospitals.

Independent butchers (an endangered species in themselves) are making capital out of the current crisis by citing their credentials as reliable suppliers who have complete traceability of their product. However the collapse in the number of independent retailers in face of the competition from the all powerful supermarkets means that this is likely to be a last hurrah rather than a return to the golden age of the British High Street.

In the UK overall household spending has failed to increase over the last year. This suggests that higher inflation and slow wage growth are squeezing household incomes and that is being felt in the UK's shops.

The current economic reality will underpin the demand for cheap food but in satisfying this demand as we are now seeing there will be accompanying risks.