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

Section 1: Background, aims and options

1.1 Background to policy issue

Food affordability

The Scottish Government has committed to exploring further action to improve food affordability as part of its wider response to cost-of-living pressures. This consultation seeks views on principle of capping the price of essential food items and how any intervention could be designed to improve affordability while taking account of nutrition, health, food security, impacts on businesses and wider Good Food Nation ambitions.

In recent years, the people of Scotland have experienced significant levels of food inflation. Food prices have risen by just under 40% over the last five years, increasing faster than average incomes over the same period. Although food inflation has eased from historic highs, food prices remain substantially higher than they were prior to the cost-of-living crisis. Many households continue to experience affordability pressures because prices increased faster than incomes over a sustained period of time. Recent data from the Office of National Statistics (ONS)^[1] shows that cumulative food inflation since 2020 was 38.1% to July 2026, compared to 32.1% for general inflation and 35.3% for average incomes (to June 2026).

These pressures are particularly significant for lower-income households, who typically spend a greater proportion of their income on food, are more exposed to food price inflation and are more likely to experience food insecurity.^[2] The ONS Living Cost and Food survey finds that whilst the average UK household spends 10.9% of equivalised income on food and non-alcoholic drinks, this rises to 15.2% for the poorest fifth of households, but falls to 7.9% for the richest fifth of households.^[3]

Sustained affordability pressures can also influence purchasing choices, contribute to food insecurity^[4] and make it more difficult to afford healthier diets. In 2023/2024 combined, 8% of adults worried about running out of food due to a lack of money or other resources in the last 12 months. This rises to just over a third (36%) of adults in single parent households, followed by 21% of single adult and 19% of large family households.^[5] According to Trussell^[6], one million people across Scotland, including 210,000 children, lived in food insecure households in 2024 with households in the most deprived areas of Scotland three times as likely to be food insecure than households in the least deprived areas (26% vs. 8%).

The Scottish Government considers that persistent food affordability pressures warrant intervention and that everyone in Scotland should be able to afford essential foods. Through this consultation, the Scottish Government is seeking experience, data and evidence to further develop an effective and proportionate policy to support food affordability.

Looking ahead, there remains significant uncertainty regarding future food prices. Recent experience demonstrates that food systems can be affected by a range of global shocks, including our exit from the European Union, geopolitical conflict, disruption to energy markets, extreme weather events and climate-related impacts on agricultural production. This uncertainty has prompted consideration of additional measures to improve future food price shocks and support household food affordability.

We recognise that food affordability is influenced by both the prices consumers pay and financial resources available to households. We are taking steps to tackle both sides of the equation, through, for example, our plans to increase the value of the Scottish Child Payment for eligible households with children under one and seeking to address high costs elsewhere such as through the nationwide expansion of the bus price cap. To help with heating bills we will provide winter heating payments to pensioners, families with disabled children and the households struggling the most, whilst protecting existing supports around fee prescriptions and free tuition fees for undergraduate students. Food price caps are one component of our approach to addressing cost-of-living pressures.

Grocery market

A 2023 review the Competition and Markets Authority indicated that food price inflation in since 2020 had largely reflected increases in costs throughout domestic and global supply chains rather than a weakening of competition in the grocery sector. The Competition and Markets Authority (CMA) concluded that the grocery retail sector was broadly competitive, with supermarkets competing particularly strongly on commonly purchased grocery items.^[7]

However, competitive markets do not necessarily deliver outcomes that align with wider government policy objectives relating to affordability, health, wellbeing or inequality and can produce outcomes which create significant affordability challenges for households. Food differs from many other consumer products because it is an essential for living and households cannot avoid purchasing. Moreover, food price inflation disproportionately impacts low-income households, even where market prices accurately reflect underlying costs.

Supermarkets play a central role in the UK food system and are the primary point of purchase for most household food and non-alcoholic drink expenditure.^[8] Through their scale and extensive distribution networks, supermarkets act as a key link between food producers, manufacturers and consumers.

Intervening in the grocery market will have impacts on retailers, food producers and supply chains. The policy could affect business directly or indirectly and there may also be potential unintended consequences of the policy proposal that need to be considered further. There may be mitigating actions that may be taken to address these specific issues.

Different size retailers from small independent stores to multinational grocery companies would all be impacted but with some less able to adapt.

This partial BRIA sets out an initial assessment of impacts providing a framework for the engagement and consultation process. Ultimately the impacts on business will depend on the specific design of the price cap and this is being consulted on.

1.2 Purpose/ aim of action and desired effect

The consultation seeks views and evidence on whether statutory price controls on selected essential food items sold by large supermarkets in Scotland would represent an appropriate and effective means of improving food affordability. It also seeks views on how any intervention could be designed and implemented, and on the potential benefits, costs and unintended consequences associated with different approaches.

The objective that we are seeking to achieve through this work is to improve the affordability of food for a selection of essential food items, particularly for those on lower incomes. Our approach should also support a healthy and balanced diet. As part of this work, we are seeking to protect primary producers in Scotland from effects that might arise as a result. The Scottish Government is also seeking views to understand whether a price cap could help with the potential of future food price shocks.

The consultation also explores how any intervention may contribute to wider policy objectives relating to poverty reduction, progress towards child poverty targets, food security, public health and the ambitions of the Good Food Nation framework. Any intervention would complement wider measures intended to improve household financial resilience and address cost-of-living pressures.

At the same time, any intervention would need to avoid disproportionate impacts on consumers, retailers, producers, food manufacturers, supply chains and the wider economy. The consultation therefore seeks evidence on both the potential benefits and risks associated with food price controls, including possible effects on product availability, consumer choice, supply chain resilience, business viability and investment.

The desired outcome of the consultation process is to strengthen the evidence base regarding the affordability challenges facing households and the potential effectiveness, costs, benefits and unintended consequences of food price controls.

This will inform future decisions on whether intervention is appropriate and, if so, what form any intervention should take. Further information on international experience of food price controls, including evidence on their impacts, is provided in Annex B of the consultation document.

1.3 Current Position – before proposed changes

The proposed policy is intended to contribute to wider Scottish Government objectives relating to poverty reduction, reducing inequalities, supporting progress towards child poverty targets, supporting the affordability of healthy and nutritious food, and improving food security. It would complement existing cost of living support measures aimed at reducing household expenditure and increasing financial resilience.

Existing action to support food affordability and household living standards includes devolved social security payments, support with energy and transport costs, free prescriptions, free university tuition and other measures intended to increase disposable income. The Scottish Government also delivers a range of policies relating to food security, child poverty, public health and Good Food Nation outcomes.

While these measures may improve household financial resilience and the ability to afford food, they do not directly intervene in the retail prices paid by consumers for essential food items. The consultation therefore seeks views on whether additional action focused specifically on food affordability may be required and whether the proposed food price cap could play a role alongside existing measures as a distinct intervention aimed specifically at food prices rather than household incomes.

At present, in the absence of further intervention, food affordability will continue to be determined primarily by market conditions, wider inflationary pressures and household incomes. Existing support measures would continue to provide assistance to households; however, some households may continue to experience difficulties meeting food costs, particularly during periods of elevated food inflation.

The consultation seeks evidence on whether intervention in food prices is justified, whether it could improve affordability outcomes, and how any potential benefits would compare with the costs, risks and unintended consequences for consumers, businesses and the wider food system. Evidence gathered through the consultation and stakeholder engagement will inform future policy development and the preparation of a Final BRIA.

1.4 Types of Business, Economic Sector, Groups or Communities that could be affected by the issue and its proposed solution

The proposed intervention has the potential to affect a wide range of stakeholders across Scotland's food system. While any direct regulatory requirements would apply only to qualifying retailers (large supermarket chains), the introduction of food price controls is likely to have wider impacts on consumers and households, food producers, manufacturers, processors, wholesalers, distributors and other businesses operating throughout the supply chain, including businesses based overseas. The scale and nature of these impacts will depend on the final scope and design of any scheme.

Businesses potentially affected therefore span multiple sectors of the economy, including retail and wholesale trade, agriculture, fishing and aquaculture, food and drink manufacturing, transport and storage, logistics and distribution, wholesale, and hospitality and food service activities. Impacts may be experienced by both businesses directly subject to any future statutory duty, by businesses connected through supply chain relationships and related sectors.

The consultation seeks views on which businesses should fall within the scope of any future intervention. In considering options, the Scottish Government has sought to balance the objective of maximising the benefits of price controls on essential food items for consumers with the need to minimise disproportionate compliance and implementation burdens on smaller businesses.

Qualifying retailers

The proposal put forward in the consultation is that large supermarket chains supplying food to consumers in Scotland would be required to comply with a future price cap duty. The consultation invites responses on whether the principle of only applying the duty to large supermarket chains achieves the best outcomes for the consumer, the retailer sector and the food supply chain.

At one end of the spectrum, a scheme could apply to all retailers selling food products covered by a price cap. This would maximise consumer access to price capped products and increase geographical coverage but would also place regulatory obligations on a large number of small and micro businesses, potentially creating disproportionate burdens.

An alternative approach could be to apply a threshold based on the physical size of retail premises. This could target larger stores, which potentially sell multiple lines of essential products, while excluding smaller outlets which may have more limited availability of essential foods. However, businesses operating similar grocery models could be treated differently depending on their store format, and physical floor space may not accurately reflect a retailer’s capacity to absorb compliance costs or implement regulatory requirements.

The consultation therefore proposes a business-level approach focused on larger grocery retailers. These businesses are typically large national and international supermarket chains operating across Scotland through physical stores and online retail platforms. Qualifying retailers operate in all local authority areas, including urban, rural, remote and island communities, and employ significant numbers of workers across retail, warehousing, logistics, distribution, customer service and management occupations. ONS Business Register and Employment Survey data show that Scotland had around 85,000 employees working in food-led non-specialised retail stores (SIC 47110) in 2024.^[9] This industry category encompasses the major supermarket chains alongside convenience grocery retailers and other food-focused retail businesses. This is intended to maximise the reach of any intervention through retailers responsible for the majority of grocery sales, while reducing the likelihood of disproportionate burdens falling on smaller businesses. According to analysis of Kantar data by NESTA, most food in GB purchased from retailers is for in-home consumption (groceries) and over 90% of this is purchased from just 11 retailers, which includes the major supermarkets.^[10],[11]

As set out in the draft legislative provisions that accompany the consultation, it is proposed that in order to be in scope of the duty, a business is a qualifying business (during a financial year in which the business offers for sale a food product of a specified description) if:

At the end of the previous financial year

• The business had more than 250 employees
• The business had a turnover of more than £250 million, and
• More than 50% of that turnover related to the sale of groceries^[12], and
• The business is not an exempt business.^[13]

Applying a price cap to all food retailers would also create a risk that businesses whose primary activity is not grocery retailing could be brought within scope simply because they sell food products that fall within a capped category – for example chains of coffee shops that sell loose fruit. The proposed business-level approach is intended to focus the proposed price control scheme on retailers that are the principal source of household grocery shopping^[14], while avoiding disproportionate regulatory burdens on businesses where food sales form only a small part of their operations. At a UK level it is estimated that 88% of daily calories are from food prepared and consumed in the home, of which 95% are from the 11 largest retailers.^[15] While differences exist between income groups most people purchase groceries either from large supermarket brands or from discounters. Further insights on patterns in food purchases can be explored via other relevant assessments that may be required to support the design of a final scheme.

The treatment of franchise and symbol-group retailers is more complex. Individual operators may trade under a larger brand while retaining varying degrees of independence in relation to ownership, staffing, pricing and supply arrangements. The consultation therefore seeks views on whether, and under what circumstances, franchise and symbol-group businesses should fall within the scope of any future scheme. Their inclusion could improve the accessibility of price-capped products for consumers but may also increase compliance and implementation challenges for smaller operators.

Under the proposed approach, qualification is based on the characteristics of the business rather than the size of an individual store. As a result, smaller outlets operated by a qualifying supermarket chain could be covered by the scheme, while independent retailers operating from similar-sized premises may not be. This reflects the policy intention of targeting large grocery businesses while minimising direct regulatory obligations on smaller independent retailers.

While most household grocery expenditure takes place through larger retailers, a significant number of businesses operating within the food retail sector are small or micro enterprises. According to data from the Inter-Departmental Business Register (IDBR), the total number of outlets (or local units) of non-specialised Food & Drink retailers in Scotland is 4,605 (as of March 2025).

Approximately 32% of these outlets (1,490) are operated by enterprises that are considered large employers (more than 250 employees across the UK) and have a turnover above £250 million across the enterprise as a whole. This means that the majority of non-specialised Food & Drink retailers in Scotland are likely to fall outwith the proposed qualifying businesses definition, with 68% (3,120 sites) falling below the proposed threshold. It should be noted that the treatment of franchise and symbol-group arrangements may have a significant effect on the number of businesses captured and therefore the number of local units required to comply with the price control obligation. Further analysis to assess this would be required in a future BRIA.

Other food retailers

While the proposed scheme is intended to apply only to qualifying retailers, other food retailers may experience indirect impacts. This could include independent convenience stores, specialist food retailers, community retailers, symbol-group operators, franchise businesses and other retailers that are not directly subject to any price cap requirements under the proposal put forward in the consultation. Depending on the final design of any scheme and how consumers and retailers respond, these impacts could include changes in consumer purchasing behaviour and competitive pressures which may adversely affect some retailers that are not subject to the price cap duty. However, the scale, nature and distribution of any such impacts remain uncertain and would require further assessment in the Final BRIA.

Food Producers and Primary Production

The proposal may have indirect impacts on food producers, including farmers, crofters and fishers. The scale and nature of any impacts would depend on the design of any food price cap scheme and how commercial impacts are distributed throughout the food supply chain. This is discussed in section 3.1.

Food Manufacturers, Processors, Wholesalers and Distributors

The proposal may have indirect impacts on other businesses operating throughout the food supply chain, including food manufacturers, processors, wholesales, distributors, logistics providers and other intermediaries. This is discussed in section 3.1.

Other Affected Businesses and Communities

Wider indirect impacts may also arise for businesses and communities not directly involved in the retail food supply chain. This may include businesses involved in the sale of food outside mainstream grocery retail, such as bakeries; hospitality, catering, pub and tourism businesses or producers of local, premium or specialist food products. There is also the potential for impacts on businesses not directly involved in the production, processing or sale of food.

Consumers and Households

Consumers are the primary intended beneficiaries of the proposed price control scheme. Any food price cap is intended improve the affordability of food for a selection of essential food items, particularly for those on lower incomes. However, benefits will depend on the on the products selected, the level at which the cap is set, and the extent to which those products reflect the purchasing patterns of households experiencing food affordability pressures.