UK food prices rising more than justified-study

LONDON Feb 28 (Reuters) - Food prices in Britain are rising more rapidly than in most developed economies and by more than is justified by higher costs, according to a report on Monday which said the government might take action against grocers.

Analysts at Swiss bank UBS said the government could seek to mobilise the media to put pressure on food producers and supermarkets, or look at another competition investigation of the sector, as is underway in Germany.

"UK food prices are rising more rapidly than most other OECD economies' food prices and have significantly outstripped food retailers' cost inflation," the analysts said.

"This could allow UK politicians to suggest that food price inflation is 'unfair' or 'excessive'."

UBS said food prices in Britain were rising at an annual rate of 4.9 percent, against 3.6 percent in Germany, a euro zone average of 1.8 percent and a U.S. increase of 1.5 percent.

"If this were a one-off event, it might be overlooked politically. However, after two years during which processed food prices have been rising more than 50 percent 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," it said.

UBS's findings contrast with the rhetoric of British supermarkets, which argue shoppers are offsetting higher prices by buying more goods on promotion. These goods are not generally included in official consumer price statistics.

Tesco (TSCO.L), Britain's biggest player in a supermarket sector which also includes Sainsbury (SBRY.L), Wal-Mart-owned (WMT.N) Asda and Morrison (MRW.L), said on Sunday it was launching a 200 million pound ($322 million) campaign to cut prices on more than 1,000 products. [ID:nLDE71Q0B1] (Reporting by Mark Potter; Editing by David Holmes) ($1=.6203 Pound)