Supermarket bosses meet Rachel Reeves amid dire food inflation warning
The bosses of some of the UK’s biggest supermarkets met Chancellor Rachel Reeves in emergency cost of living talks on Wednesday, amid warnings that food inflation could rise to double digits this year.
Leading supermarkets including Tesco, Sainsbury’s and Morrisons attended Downing Street after efforts to gather industry bosses last week were abandoned amid concerns ministers planned to lecture the retailers on “profiteering.”
The session came as the Food and Drink Federation (FDF), which represents the UK’s 12,000 food and drink manufacturers, warned food inflation could rise as high as 10 per cent this year, as the Iran war adds to the list of cost pressures facing grocers.
The tete-a-tete was attended by executives at Tesco, Sainsbury’s, Morrisons, Aldi, Lidl, Co-Op, Marks & Spencer, Iceland, and Ocado. Trade body the British Retail Consortium (BRC) was also in attendance.
Asda did not attend the meeting, in the week after its chief executive took aim at the government for a lack of support for farmers and petrol retailers.
Iceland chief executive Richard Walker, who is a cost-of-living advisor to the government, did not attend due to the conflict of interest and was represented by Stuart Lendrum, the budget supermarket’s director of product, process and sustainability.
A government spokesperson said: “The Chancellor and environment secretary had a positive meeting with Britain’s leading supermarket to discuss the economic impacts of the war in the Middle East.
“They agreed to work together to explore what more can be done to ease the cost of living for consumers and strengthen supply chains.”
Among the issues raised with the Chancellor by supermarket bosses included the tax and regulatory headwinds facing retailers.
Government ‘should review policy costs on supermarkets’
Morning Wire understands that issues on the table included new workers’ rights reforms, recent increases to employers’ national insurance contributions and the minimum wage – which came into force today – and a packaging sustainability tax.
The Extended Producer Responsibility (EPR) tax has been a bone of contention for some retailers in recent months, including retail giant John Lewis and sausage maker Heck.
The EPR tax is charged on large businesses to contribute to the disposal of their packaging, with heavy materials like glass incurring significant charges.
Earlier this month, premium drink mixer brand Fevertree announced it is taking the Environment Agency to court over the tax, which it thinks has been applied unfairly to its glass bottles.
The BRC has called on the government to work with retailers to stop prices rising for consumers.
Chief executive Helen Dickinson said: “Retailers had a constructive meeting with the chancellor. Supermarkets are doing everything they can to keep food prices affordable and maintain the ongoing resilience of their supply chains.
“While the conflict in the Middle East means some inflation is inevitable, there are domestic policy levers that government can pull in order to mitigate some of the inflationary pressures.
“Industry is committed to working with government to consider these further and on ways it can continue to support British households.”
The Treasury had said it would use the meeting to understand the scale of potential price rises caused by the energy and supply chain costs caused by the Iran war, though supermarkets also raised the tax and regulatory burdens they face.
Last week, Marks & Spencer boss Stuart Machin said “policy costs” on retailers had pushed up energy bills, pointing the finger directly at the government.
Reeves first offered to meet supermarket bosses last week, but the Chancellor was snubbed after her invitation was interpreted as an attempt to lecture grocers over alleged “profiteering” from the Middle East crisis.
Asda boss: claims of profiteering are ‘nonsense’
Reeves faced a similarly spiky response earlier this month when she summoned petrol retailers to discuss claims of “price gouging” amid rising fuel prices.
The trade body representing petrol retailers called off the meeting last minute – condemning the Chancellor’s “inflammatory” language – before it was later rescheduled.
Last week, Asda executive chairman Allan Leighton called on the government to “stand up and start doing stuff” to help farmers, and to cut the price of fuel.
Asda runs more than 300 petrol stations in the UK, and Leighton also dismissed the government’s petrol “profiteering” concerns as “nonsense”.
Simon Roberts, the boss of Sainsbury’s, has sought to soothe fears of price inflation, saying fixed-price contracts on energy and fertiliser costs will keep severe cost increases at bay for the immediate future.
But the FDF upgraded its food inflation forecast for this year, up from 3.2 to nine per cent – though the trade association said it could climb into double figures if the conflict persists.
The FDF said their forecast is based on the assumption that blockages to the Strait of Hormuz, a vital shipping passage, will end within the next few weeks.
Dr Liliana Danila, Chief Economist, The Food and Drink Federation (FDF), said: “The food and drink sector is already feeling the force of this geopolitical shock.”