Price controls on essential foods: partial business and regulatory impact assessment (BRIA)

Annex A: An illustrative example of a food price cap

This illustrative example is intended to demonstrate what considerations may be needed in selecting a particular capped food item (eggs) in an item-based price cap, as put forward in the consultation

Background to the egg market in the UK

The cumulative increase in egg prices since 2020 was 59.8%, substantially higher than cumulative food price inflation (38.1%) and general inflation (31.7%) over the same period.^[24] The increase in egg prices over this period has been driven by a combination of factors, including avian influenza outbreaks that reduced the laying flock and constrained supply, higher feed and energy costs, rising labour costs and wider increases in production and distribution costs.^[25]

In 2025, it was estimated that the UK produced 12.5 billion eggs and imported 2 billion eggs, with the UK being 89% self-sufficient.^[26] Retail sales value was roughly £2.1 billion, with shell eggs accounting for 64% of the market. Supermarkets and discounters are estimated to account for over 75% of egg sales.

Industry analysis by IGD Economics suggests that increases in egg prices between 2020 and 2025 were primarily driven by higher production and supply-chain costs rather than substantial expansion of retailer margins. IGD highlights rising production costs, labour costs and packaging costs across the supply chain, and characterises eggs as a highly visible and price-sensitive grocery staple within competitive retail pricing.^[27],[28]

For illustrative purposes, we assume that the item-based price cap could apply to a 6 pack of free-range eggs. We assume that most of the businesses in scope of the food price cap regulations are likely to sell this product. Free-range eggs represent 78% (including 2% organic) of retail egg sales in the UK and this product is also included as an item in the basket of essential foods that are include in the Food Foundation’s basic basket tracker^[29], with the price of a 6 pack of medium free-range eggs being £1.80 (as of 16^th June).

Factors underpinning item choice (eggs)

There are many relevant factors that could be considered when deciding which items to subject to a price cap. Some of these factors are set out in the consultation as matters which Scottish Ministers would, in particular, be expected to have regard to. These factors set out in the consultation are as follows:

a. The general affordability of food (particularly as regards persons on low incomes);

b. Scottish Minister’s policies or strategies relating to healthy eating;

c. Guidance on nutrition;

d. The impact of the proposals on producers, retailers and other businesses Ministers consider may be impacted;

e. Consumer behaviour as regards the purchase of food;

f. Food security;

g. Any other matters the Scottish Ministers consider appropriate.

The first factor (a) relates to the general affordability of food, particularly as regards persons on low incomes. An assessment of this factor may include the extent to which eggs contribute to average household food expenditure (and/or food expenditure among lower-income households) and the extent to which a price intervention on eggs could address food affordability pressures, both individually and alongside a basket of other items. In practice, any assessment would need to consider purchasing patterns, household expenditure data and trends in the price of eggs over time.

The second and third factors (b and c) relate to Scottish Ministers' policies and strategies on healthy eating, together with relevant nutrition guidance. Existing dietary guidance, such as the Eatwell Guide, is likely to be relevant in considering how a product such as eggs aligns with health and nutrition objectives. A food item may also be assessed according to whether it is considered a product high in fat, sugar and salt (HFSS). Within the Eatwell Guide, eggs fall within the ‘Protein foods’ category. Eggs are a good source of protein, vitamins and minerals and are not considered to be an HFSS food.

The next factor (d) relates to the impact that a price cap on the product may have on producers, retailers and other businesses across the food supply chain. This is likely to include an assessment of production costs relative to the selling price, as well as typical retailer margins. It may also include consideration of the vulnerability of the product to supply-side shocks, such as adverse weather events or animal disease outbreaks, and the implications this may have for producers and retailers in the context of a fixed price cap. There are also likely to be differential impacts across the egg supply chain, including on poultry producers, egg packing facilities and retailers. Consideration may also be given to the extent to which the product is sourced from Scottish producers and the potential implications for domestic supply chains (see factor f). The extent of any price reduction from a price cap may also depend on existing retailer pricing strategies. Many major supermarkets already operate price-matching schemes for selected products with discounters such as Lidl or Aldi. If eggs or other products were already subject to such arrangements, the additional impact of a price cap on consumer prices may be more limited.

Factor (e) relates to consumer purchasing behaviour and preferences. As set out in the consultation, this is distinct from considerations of impact on affordability. This might include an assessment of the frequency with which eggs are purchased, the proportion of the population that regularly consume eggs as part of their diet, and how consumer preferences may influence the extent to which a price cap would be utilised. It is also important to consider at this stage the price elasticity of demand for eggs. Price elasticity of demand for eggs is generally considered to be relatively inelastic, meaning that changes in price may result in proportionately smaller changes in purchasing behaviour. Consideration may also be given to equality impacts and whether particular groups are more or less likely to benefit from the inclusion of a food item within a price cap scheme due to differences in dietary preferences, cultural and religious practices, medical requirements, household composition and purchasing behaviour.

In terms of dietary need, requirement and preferences, there is likely to be a need to consider whether food products are compatible with plant-based diets (vegans), religious or traditional diets (some Buddhist and Hindu traditions do not eat eggs) and medical considerations such as allergies to egg proteins. Consideration would also need to be made alongside other items included within any broader basket of capped products.

The final factor (f) relates to food security. The UK is largely self-sufficient in egg production, with domestic producers supplying the majority of eggs consumed in the UK. Consideration may therefore be given to how a price cap could affect the resilience of domestic production and wider supply chains. Egg production has been affected in recent years by avian influenza outbreaks, increases in feed and energy costs, and broader supply chain disruptions, all of which can result in rising production costs and temporary reductions in supply. In assessing eggs as a candidate food item, consideration may therefore be required as to whether a fixed price cap could affect incentives for domestic production, investment or wider supply chain resilience during periods of market stress. Wider considerations may also include impacts on imports, animal welfare standards, environmental outcomes and the long-term resilience of the domestic food system.

In addition to the above factors, any other relevant factors would also be taken into account.

Setting the price cap

In setting the level of a price cap for a food item (i.e. eggs), consideration has to be given to its current price of the item and how prices vary between retailers. A choice would also have to be made on how specific the food item is for the purpose of establishing the cap. For illustrative purposes we assume that the price cap could apply to a 6 pack of medium free-range eggs, however other variations of price caps could be imposed (for example a cap on price per egg, a cap on a larger pack size, or less restrictions around production method).

It is expected that in order to set a price cap for a particular food item, ‘a baseline price’ would need to be established for that food item by observing the recent price history of a given product based on the lower end of the market and not for higher end retailers or for premium versions of products. Other factors that need to be considered include product quality, branding, size and reductions/price promotions. For eggs, consideration of production method (i.e. free-range) may be particularly relevant.

Once a baseline price is established, a price cap would then need to be set the relevant food item. For context, 6 medium free-range eggs sold at a retail price of £1.80 across four major supermarkets in the UK (as of 13 August 2026). Setting a price cap at this baseline price (assuming no increase in price level ahead of implementation of any cap) would reflect current market conditions and therefore protects consumers from future price rises, however immediate consumer benefits may be limited where retailers are already pricing at or below the cap level, although consumers purchasing from retailers charging above the cap could benefit from lower prices and greater price certainty.

Alternatively, setting a price cap above the baseline (set a fixed percentage above, for example £1.80 + 10%) would also provide no immediate benefit to consumers but could act as a “backstop” against future periods of high inflation and also allow retailers some flexibility in their current pricing.

Setting a price cap below the baseline price (£1.80 – 10%) would result in an immediate benefit to consumers through lower prices but could also reduce retailer margins and, in some circumstances, result in products being sold below cost.

Other alternative mechanisms for setting a price cap put forward in the consultation include an affordability assessment approach, a cost-based approach and averaging.

• An affordability assessment approach would set the price for a 6 pack of medium free-range eggs at a level that ensures people on low income only spend a certain percentage of a fixed income on this item (or as part of a wider basket of items) and that this is maintained over time. In practice, ‘income’ could refer to many reference measures of income such as payments rates under Universal Credit or expenditure assumptions derived from the Minimum Income Standard (MIS), which estimates the income required for an acceptable standard of living. Different affordability benchmarks may produce materially different cap levels and therefore different outcomes for consumers and businesses.
• A cost-based approach links the price cap to the underlying costs of producing and supplying the product. This could be established by undertaking supply-chain analysis of items under the price cap. However, it should be recognised that some retailers may use eggs as a loss leader or low-margin product. A cost-based price cap could therefore be set above prevailing retail prices. While retailers would remain free to price below the cap, the cap may have little immediate effect on consumer prices and primarily act as a safeguard against future price increases
• An average price approach would be to set the price cap based on a running average price of a product over a fixed period of time (for example a year) across multiple retailers. This would insulate consumers from temporary spikes in prices over time by constraining prices to levels in a previous 12-month period.

Quantitative potential impacts

Given the possible different design elements of a future food price control and its implementation, it is difficult estimate quantitative impacts - even for a single product such as a 6 pack of medium free-range eggs.

In order to outline the potential quantitative impacts independent of key policy design elements such as the composition of the essential basket, the level at which the price cap is set or the mechanism through which it would operate, the following information would be required:

• The share of overall household expenditure on food that each essential item in the basket represents
• The current retail prices for each of the essential items (including relevant variation across retailers and locations)
• The price elasticity of demand for the essential items and consideration of cross-price elasticity with other products to account for potential for substitution effects
• Forecasts of future cost inflation (preferably for the product) and/or historic annual price growth rates
• An assessment of the degree to which a given essential item is subject to promotions, discounting or loyalty pricing or seasonality in pricing.
• An assessment of retailer margins on the essential items to establish the impact of any price cap on retailer profitability.
• Retailers' ability to absorb capped prices
• The degree of market concentration for the essential items
• The supply chain costs for the essential items, particularly producer/farm-gate prices and margins at different stages of the supply chain
• Average sales value and volume for the detailed product lines of the essential items
• Household expenditure by income decile on the essential items
• Consumption patterns for the essential items
• Differences in expenditure, consumption and purchasing patterns by age, disability, sex, ethnicity, household composition, geography and income level.

If this information can be accessed, exploring the potential quantitative impacts may be feasible for the full BRIA.