British inflation hit a new 40-year high in July on soaring food prices, according to official data released on Wednesday, adding to a spiraling cost-of-living crisis in a country fast facing the prospect of recession.

The Consumer Prices Index (CPI) went up to 10.1 percent last month from 9.4 percent in June, already a four-decade high, the UK's Office for National Statistics said.

Bread and cereals were the largest contributors to the jump in food prices, followed by milk, cheese and eggs.

"The eye-watering increase in the price of food in July will be dismal reading for many families already struggling to pay for their supermarket shop," said Laura Suter, head of personal finance at AJ Bell. 

"Food inflation reached 12.7 percent in July, having seen the highest monthly growth in more than 20 years."

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The Bank of England warned earlier in August that UK inflation would go up to just above 13 percent this year, which would be the highest level since 1980.

It also estimated that the country would enter a recession near the end of the year that is set to last until late 2023.

Britain's economy was also shown to shrink in this year's second quarter, according to official data released last week.

"I understand that times are tough, and people are worried about increases in prices that countries around the world are facing," finance minister Nadhim Zahawi said following the latest data.

"Getting inflation under control is my top priority," he said, as Britons face also rocketing energy bills.

Inflation/Succession 

While the government of outgoing Prime Minister Boris Johnson has pledged to help reduce fuel costs for millions of Britons this coming winter, the public and consumer groups are demanding far more state support as wage values fall at a record pace.

The UK's deteriorating economy will be taken over by Johnson's successor after he leaves office next month, with candidates Foreign Secretary Liz Truss and former finance minister Rishi Sunak hoping to take over as leader of the Conservative Party, and consequently, the whole country.

The Bank of England has tried to bring down inflation by hiking its key interest rate several times since the end of last year, making its biggest since 1995, leaving borrowing costs at 1.75 percent.

"Today's data leaves the Bank of England stuck in a bit of a quandary, with multi-decade high inflation accompanied by an economy expected to enter into a deep recession in 2023," noted Matthew Ryan, head of market strategy at global financial services firm Ebury.

The BoE's recent moves mirror aggressive monetary policy from the US Federal Reserve and the European Central Bank, as the world races to handle inflation spikes fueled by the Ukraine conflict. 

Supermarket spin

Some of Britain's biggest supermarket chains are also applying new measures to tackle the impact of the cost-of-living crisis, with Iceland Foods announcing they would allow shoppers to take out small, interest-free loans to buy groceries.

Partnering with non-profit lender Fair For You to offer loans of 25-100 pounds ($30-$121), Iceland will offer financially vulnerable customers through pre-loaded cards, allowing them to make repayments once a week.

"More than ever, people are struggling to purchase much needed everyday items during this relentless cost of living crisis, and fresh thinking is required by business and government to find workable solutions," Iceland Foods Managing Director Richard Walker said in a statement.

The loan scheme would offer flexible repayment programmes and borrowers would not be harassed by debt collectors, according to Iceland officials.

The scheme follows what the supermarket giant called a successful pilot with 5,000 customers. Nearly three-quarters of them said they were now less likely to fall behind on bills and 92 percent reduced their use of food banks, which provide emergency food supplies to families in need.