One of Britain’s biggest food producers has given warning that spiralling energy prices will soon push up the cost of everyday products such as pizzas and biscuits.

Northern Foods said that, as well as continued pressure from higher commodity costs, it was facing increases of 60 per cent in the cost of gas and electricity, which it uses for baking its products.

Stefan Barden, chief executive, said rising wholesale energy prices could be responsible for price increases of up to 5 per cent on pizza and biscuits over the next six to 12 months.

Gas and electricity prices in the UK are closely tied to the oil price, which hit a new record of $135 a barrel last week, up from around $80 a barrel a year ago.

Mr Barden added that the strong euro was also adding to the inflationary pressure in the group’s frozen food division, where most of the manufacturing is based in Ireland, but exported to the UK.

He told Times Online: “We have had a deflationary environment for a decade but inflation is here to stay.

“Fuel inflation is very, very high and is going to hit the industry hard over the next six to 12 months. Fuel will feed through into food,” Mr Barden said.

Northern, which makes Goodfella’s pizzas and Fox’s biscuits, said it had managed to pass on most of the higher commodity costs in the past year.

Annual results today showed that pre-tax profits in the year to March 29 rose 25.3 per cent to £50.1 million.

Group revenue rose 5 per cent to £931.9 million.

However, Northern said it faced a possible £24 million charge linked to its decision to mothball one of its dedicated Marks & Spencer (M&S) factories in Grantham earlier this month.

It said new supply terms offered by M&S meant the factory, which produced Italian ready meals, would have been unprofitable to run. Northern supplies sandwiches, pizzas and ready meals to most of the leading supermarkets. Nearly a third of its revenue comes from contracts to supply M&S.

Mr Barden’s warning comes amid increasing fears about the impact of food inflation on consumers.

Alistair Darling, the Chancellor, held a summit with Britain’s biggest supermarkets last week to discuss the effect of price increases on the UK economy.

The Centre for Economic and Business Research said the UK faced food inflation of 5 per cent a year for the next decade.

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