The UK Treasury is holding discussions with major supermarkets about a voluntary price cap on essential food items, according to sources familiar with the matter.

Retailers would commit to freezing prices on staples such as eggs, bread, and milk to help ease household cost-of-living pressures.

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Potential Incentives for Retailers

In exchange for these voluntary controls, the government may relax certain packaging requirements.

Officials are also considering deferring upcoming regulatory changes on healthy food advertising, which currently generate revenue for the Treasury.

Government officials want to ensure that shop-level price controls do not negatively impact the income of UK farmers.

The ongoing negotiations are expected to inform a future announcement by Chancellor Rachel Reeves regarding cost-of-living relief.

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Industry Response and Context

People close to the discussions noted that no official agreement has been signed yet.

Supermarkets have reportedly shown a cool response to the proposal, with one retail source dismissing it as a knee-jerk reaction.

A Treasury spokesperson told the Financial Times: "The chancellor has been clear we want to do more to help keep costs down for families, and will set out more detail in due course."

Unlike a similar mandatory policy proposed by the Scottish National Party, the UK government version would remain completely voluntary.

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The pressure arrives as UK food inflation reached 3.7% in April, amid warnings that supply chain disruptions from the Iran war could push inflation up to 10%.

Chancellor Rachel Reeves is also expected to grant competition watchdogs rapid investigatory powers.

These new measures will allow regulators to probe alleged price gouging by energy firms during the crisis triggered by the Iran war.

The discussion comes despite claims from major grocers that they operate on tight profit margins while managing between 30,000 and 60,000 product lines.

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Tesco recently reported an 8.5% increase in annual pre-tax profits, reaching £2.4bn ($3.21bn) on revenues of £66.6bn.