UK finance ministry presses supermarkets to cap food prices, sources say

(Corrects reference to finance ministry from foreign ministry in paragraph 6)

LONDON, May 19 (Reuters) - Britain's finance ministry is pressuring major supermarket groups to introduce voluntary ‌price caps on key products, such as eggs, bread and milk, in ‌return for easing some regulations, according to two people with knowledge of the situation.

Confirming a Financial Times report ​that the ministry had proposed relaxing some new packaging rules and possibly delaying changes to rules around healthy food in exchange for price caps, the people said the grocers had reacted with anger and were pushing back.

The proposals come as Prime Minister Keir Starmer's government seeks ‌to address an ongoing cost ⁠of living crisis and follow a similar move by the Scottish National Party, which holds power in Scotland's devolved parliament.

"If this happened, ⁠nobody would invest in the UK," one of the people said.

"If you want food price inflation to decline, you need to start looking at the cost of regulation on business," they ​said, highlighting ​the government's moves to raise employer taxes, the ​national minimum wage, introduce new packaging ‌levies and propose the reformulation of thousands of food lines.

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A spokesperson for the British finance ministry said: "The chancellor (Rachel Reeves) has been clear we want to do more to help keep costs down for families, and will set out more detail in due course."

British grocery inflation was 3.8% in the four weeks to April 19, according to researcher Worldpanel by ‌Numerator.

The Bank of England said that businesses it ​had spoken to last month expected food price inflation ​to reach 6% to 7% later ​this year, reflecting the economic fallout from the Iran war.

The British ‌Retail Consortium, which represents Britain's major supermarket ​groups, including market leader ​Tesco and Sainsbury's, said it opposed price caps.

"Rather than introduce 1970s-style price controls and trying to force retailers to sell goods at a loss, the Government ​must focus on how it ‌will reduce the public policy costs which are pushing up food prices ​in the first place," BRC CEO Helen Dickinson said.

(Reporting by James Davey, additional ​reporting by Alistair SmoutEditing by Gareth Jones)