Price of olive oil to rise by as much as 25pc

The price of olive oil will increase by as much as 25pc within months, one of the UK's largest supermarket suppliers has warned, as the heatwave in Spain hammers production.

Extra virgin olive oil was already 7.3pc more expensive in July compared to June, according to the Mintec benchmark prices, but is set to go even higher as supermarket contracts come up for renewal.

Major supplier Acesur, which sells 20,000 tonnes of olive oil in the UK every year, said that price increases for customers could range between 20pc and 25pc. It said the heatwave across Europe had a "drastic" effect on Spain's olive oil production.

The price rise is expected to come through when new contracts are agreed in the next three to four months, according to the BBC.

Spain is responsible for around half of the global production of olive oil, making 1.4m tonnes a year. Acesur said the current forecasts were for this to have dropped to 1m this year.

The heatwave has been sweeping across the continent, with Spain not the only major olive oil producing nation affected. Italy, for example, is suffering from its worst drought in 70 years.

Estimates suggest Italy's production of olive oil could be between 20pc and 30pc lower than it was last year. In the North of Italy, lakes and rivers are at record lows, with officials suggesting this year will bring the hottest and driest year on record for Italy.

The war in Ukraine, meanwhile, has slashed the global supply of sunflower oil, given the country was the world's largest exporter of the oil, pushing prices of all oils higher.

A rise in the price of olive oil is set to pile further pressure on already-squeezed households, who are facing the biggest income squeeze on record.

The Bank of England last week said it was now expecting inflation to hit a four-decade high of 13.3pc later this year, with the cost of living crisis at the heart of the Tory leadership contest.

Rishi Sunak and Liz Truss have been laying out their plans to deal with the forecasted downturn in the economy, with frontrunner Ms Truss plotting an emergency budget to tackle the issue.