Industry leaders have warned that Rishi Sunak’s plan to encourage supermarkets to cap their prices of everyday staples won’t make a difference to shoppers.
With food price inflation in the UK reaching a staggering 19.1% in the year to March – the highest rate in Western Europe – the prime minister is understandably eager to bring the figure to a sustainable level.
Downing Street is understood to be drawing up an opt-in scheme based on a similar model in France, which would see retailers asked to charge the lowest possible amount for some essential products, including milk and bread.
While none of this would be mandatory, the British Retail Consortium (BRC) has met the plan with deep scepticism and has compared it to “1970s-style price controls”.
Yahoo News understands that ministers are yet to meet with supermarket bosses to discuss a price cap scheme and that retailers believe such a plan would be “meaningless and ineffective”.
In a statement, Andrew Opie, Director of Food & Sustainability at the BRC, said: “This will not make a jot of difference to prices.
“High food prices are a direct result of the soaring cost of energy, transport, and labour, as well as higher prices paid to food manufacturers and farmers. Yet despite this, the fiercely competitive grocery market in the UK has helped to keep British food among the most affordable of all the large European economies.
“Supermarkets have always run on very slim margins, especially compared with other parts of the food supply chain, but profits have fallen significantly in the last year.
“Even so, retailers continue to invest heavily in lower prices for the future, expanding their affordable food ranges, locking the cost of many essentials, and raising pay for staff.
“As commodity prices drop, many of the costs keeping inflation high are now arising from the chaos of new regulation coming from the Government. Rather than recreating 1970s-style price controls, the Government should focus on cutting red tape so that resources can be directed to keeping prices as low as possible.”
The British Government is glancing at plans to have seller cap the prices of essential food items such as bread and milk, the Telegraph reported, as the cost of such essentials continued to rise in the double digits.
However, asked about such price controls, health minister Steve Barclay told BBC TV it was “not my understanding” on Sunday.
Prime Minister Rishi Sunak’s No. 10 Office is talking with supermarkets on a deal similar to one in France, where major retailers charge the “lowest possible amount”, the Telegraph reported on Saturday.
The PM’s office did not respond to Reuters’ request to comment on the announcement, citing sources within the Government.
“My understanding is that the government is working constructively with supermarkets as to how we address the genuine concerns around food inflation and the cost of living and doing so in a way that is also very mindful to the impact on suppliers,” Barclay told BBC TV.
Britain has Western Europe’s highest rate of inflation for food, with prices up more than 19% over the past year, the worst such run since the 1970s. Household budgets have also been strained by surging energy prices, driven higher partly by the war in Ukraine.
Major supermarkets such as Tesco and Sainsbury’s have recently announced price cuts on some food items.
The British Retail Consortium (BRC), which represents all the major supermarkets, blamed the Government’s new regulation for many of the costs and urged it in a statement to simplify rules “rather than recreating 1970s-style price controls.”
“This will only make a little contrast to prices. High food prices are a direct result of the soaring cost of energy, transport, and labour, as well as higher prices paid to food manufacturers and farmers,” BRC’s Andrew Opie said.
Bill Grimshaw, ex-chief executive of Iceland, said a price cap might not work – while seeming to acknowledge that supermarkets could compete harder to trim prices.
He said: “It’s not a good plan for the Government to get incriminated in the markets this way.
“I don’t trust there is a need for some action at this point because the market is working as well as it should. I don’t see the supermarkets fighting each other [for customers] as much as they should; it is all a bit cosy.
Mr Grimshaw said any arrangement, voluntary or not, was likely to be bureaucratic, adding: “I believe the Government do believe in free markets. The question they should have asked [the big four grocers] is, ‘Why aren’t you fighting each other as hard as you should be?’ They are quick at raising prices due to the pandemic and Ukraine but less quick at lowering them.”
Stores are expected to be allowed to select which items to cap and would take part in the initiative, modelled on a deal in France, only voluntarily.
Inflation fell from 10.1 per cent in March to 8.7 per cent last month after energy costs dropped.
The idea of chains introducing voluntary price controls on essential foods came from a meeting between John Glen, Chief Secretary to the Treasury, and retail representatives this month.