Supermarkets could face a competition inquiry because of food price hikes according to investment bank UBS.

Food prices have been rising faster than inflation in Britain, increasing at an annual rate of 4.9% here compared with a eurozone average of 1.8%, UBS claimed.

The price surge is steeper in Britain than all other 34 members of the Organisation for Economic Co-operation and Development, the report claimed. UBS said the variance could lead politicians to question the fairness of supermarket pricing and stimulate an inquiry.

UBS economists Paul Donovan and Larry Hatheway said: “The UK is particularly vulnerable to political action against food price increases. The UK food retail system is demonstrably passing on higher prices than other countries. A convincing case can be made that these increases exceed those justified by cost increases.”

However, grocery retailers were furious with the report, saying that UK food inflation is much lower than the levels claimed by UBS, and also that the report failed to take into account the very high level of goods sold on promotion.