One quarter of British shoppers struggling as grocery price inflation hits 17%
Supermarket inflation has hit a new record high this month, with prices climbing by more than 17% in the year to February.
Data provider Kantar reports that grocery price inflation rose to 17.1% in the four weeks to 19 February. This means that households face spending an extra £811 on their annual supermarket bills, unless they change their shopping habits.
This is the highest level of grocery inflation Kantar has ever recorded, and shows that the pressures on food shoppers are intensifying this year. One in four shoppers are now struggling financially, they warn.
Fraser McKevitt, the head of retail and consumer insight at Kantar, says:
Shoppers have been facing sustained price rises for some time now and this February marks a full year since monthly grocery inflation climbed above 4%. This is having a big impact on people’s lives.
Kantar’s latest research shows that grocery price inflation is the second most important financial issue for the public behind energy costs, with two-thirds of people concerned by food and drink prices, above public sector strikes and climate change.
The report shows that more households are being dragged into the cost of living crisis. squeeze.
McKevitt says:
One quarter say they’re struggling financially, versus one in five this time last year. The numbers speak for themselves. If people don’t change how they buy their groceries, households are facing an £811 increase to their average annual bill.
However, cost-of-living pressures failed to dent enthusiasm for Valentine’s Day celebrations this year.
Sales of steak up by a quarter in the seven days to February 14 compared to the previous week, sparkling wine sales doubling and shoppers spending an extra £5m on boxed chocolates.
Key events
BP chief Bernard Looney defends company’s tax bill
Alex Lawson
BP chief executive Bernard Looney has said the oil and gas giant has paid its highest global tax bill in its 113 year history, in the face of calls for an extended windfall tax.
Over the sounds of chanting and singing from climate protestors coming from outside the International Energy Week conference in central London, he said BP had paid $15bn tax last year, my colleague Alex Lawson reports.
Looney said:
“Here in the UK, if we make £4 in the North Sea, we pay £3 in taxes. And quite frankly, the other pound is more than reinvested back into the country.
So we pay our taxes – that’s important that we do that.”.
MPs and campaigners have called for the windfall tax on North Sea oil and gas firms to be toughened, to capture greater profits to hand to those struggling with bills, instead of to shareholders after BP and Shell posted record earnings in recent weeks.
BP was also criticised for scaling back its climate change goals. Looney said BP was committed to pursuing low carbon projects, pledging:
“Net zero is a new era of opportunity for companies like ours”.”
Looney said the company was investing $8bn in the energy transition and was rewarding “millions” of shareholders who relied on its dividends.
He said:
“I there is a narrative that shareholders are somehow faceless institutions, they are far from it.”
Looney did not mention his own rewards, after the Sunday Times reported investor disquiet over his planned £11m bonus.
Labour holds ’emergency summit’ over food shortages
Helena Horton
Labour shadow ministers are holding what they call an ‘emergency summit’ with food retailers, to find out the causes of the current shortages, our environment reporter Helena Horton writes.
Jim McMahon, the shadow environment secretary, has invited representatives from the food production, manufacturing and retail sectors to Parliament today to discuss the ongoing challenges.
Also hosting the meeting are Jonathan Reynolds, Labour’s Shadow Secretary of State for Business and Industrial Strategy and the party’s Deputy Leader Angela Rayner.
The party is trying to show it takes food security issues seriously after empty fruit and vegetable shelves and rationing hit the UK.
McMahon has been very critical of the government’s handling of the crisis, referring to environment secretary Therese Coffey as “calamity Coffey” and demanding she “get a grip” after she suggested that British people should “cherish” turnips during the salad crisis. He has called for her to produce an assessment of the problem in the UK, and a plan to solve the crisis.
He said:
“Not only is turnipgate an insult to the British public, it’s also two fingers up to our farmers.”
Yesterday, farming minister Mark Spencer met with retailers. He said:
“I have asked retailers to look again at how they work with our farmers and how they buy fruit and vegetables, to further build preparedness for these unexpected incidents.
“We also welcome their commitment to working with government and farmers on longer term solutions.”
BoE defends delays on digital pound work
Down the corridor in parliament, MPs on the Treasury committee are questioning officials from the Bank of England about its plans for a digital pound.
Q: We were expecting to see your new consultation on digital currency last year – what caused the delays?
BoE deputy governor Sir John Cunliffe insists that the delay in releasing the consultation paper was not due to differences of opinion with the Treasury – the cause of the delays was “simply practical”.
He says the Bank’s senior leadership were very busy in September and October, when it had hoped to take the digital currency plans through governance processes.
Cunliffe adds:
Of course, within the Treasury, also business was a bit disrupted.
[I think that’s a reference to the chaos of Kwasi Kwarteng’s mini-budget, which his successor Jeremy Hunt unwound in November’s autumn statement – but not before the non-digital pound had hit a record low].
Q: Then we were told we’d get the paper in January…
Cunliffe says there was pressure of other business, and the Bank thought it was better to get the paper right than to rush it out.
Q: So what were the areas of disagreement with the Treasury, and what changes were needed?
Cunliffe insists there weren’t any disagreements, although there were some ‘drafting changes’ after the document was passed around Whitehall – just “pretty minor” changes and “nothing of substance” though, he insists.
That paper, incidentally, suggests the ‘Britcoin’ digital pound could be in use as an alternative to cash by the end of the decade.
Food and drink manufacturers expect to keep raising their prices this year, MPs have heard this morning, which will add to grocery inflation.
Caroline Keohane, head of industry growth policy at the Food and Drink Federation, has told the Business, Energy and Industrial Strategy Committee that food manufacturers expect to increase their selling prices by around 7% this year.
This is being driven by rising input costs, which are expected to increase by 10% this year, Keohane says.
These tight margins will hit producers’ ability to invest, she say.
Those cost pressures include high energy costs – running at 22% higher than last year – and significant labour shortages. Vacancies in the sector are running at around 7%, which is double the manufacturing and UK average, Keohane explains.
“Poorly designed regulations” are also adding to costs, Keohane says, citing the Extended Producer Responsibilities. Those regulations put the responsibility for a product’s end-of-life environmental impacts on producers, in an attempt to increase recycling rates.
The hearing, on whether UK businesses can keep up with global competition in coming decades, is being streamed here.
Credit Suisse ‘seriously breached’ obligations in Greensill affair: Swiss watchdog
Switzerland’s financial watchdog has ruled that Credit Suisse “seriously breached its supervisory obligations” in connection with its business relationship with financier Lex Greensill and his companies.
FINMA announced this morning that it has ordered “remedial measures”, after concluding that Credit Suisse had “seriously breached its supervisory obligations in this context with regard to risk management and appropriate organisational structures”.
The regulator says:
In future, the bank will have to periodically review at executive board level the most important business relationships (around 500) in particular for counterparty risks. In addition, the bank is required to record the responsibilities of its approximately 600 highest-ranking employees in a responsibility document.
FINMA has also opened four enforcement proceedings against former Credit Suisse managers.
In 2021, Credit Suisse suspended $10bn of investor funds after the collapse of the supply-chain lender Greensill Capital, whose loans were packaged and sold to Credit Suisse clients.
FINMA says today that the business relationship with Greensill was repeatedly discussed at Credit Suisse management level, but usually only done selectively because of a specific event or request.
“There was a lack of an overall view as well as regular, consistent engagement with the risks associated with Greensill at the highest level,” the regulator says.
Ulrich Körner, Chief Executive Officer of Credit Suisse, says the bank welcomes the conclusion of FINMA’s work.
Körner says:
This marks an important step towards the final resolution of the SCFF issue. FINMA’s review has reinforced many of the findings of the Board-initiated independent review and underlines the importance of the actions we have taken in recent years to strengthen our Risk and Compliance culture. We also continue to focus on maximizing recovery for fund investors.”
Körner adds that since March 2021 (when Greensill Capital filed for insolvency), Credit Suisse has taken action to directly address many of the issues subsequently highlighted by FINMA.
Elsewhere in the retail sector, union members at an Amazon distribution centre in Coventry have begun a second day of industrial action.
More than 310 Amazon staff at its giant fulfilment centre in the West Midlands city are striking today, and will also strike on 2 March and from 13 to 17 March, in an ongoing pay dispute.
In January, workers at the Coventry warehouse became the first in the UK to take strike action against the online retail giant. As well as seeking higher pay, they have also complained of overbearing management practices and long hours.
The GMB union is calling for a pay rise from £10.50 to £15 an hour, although the union is not recognised by Amazon.
The leader of Amazon’s first union made his first trip outside the United States last week to support striking workers at the Coventry warehouse.
Chris Smalls, who helped coordinate a successful unionisation drive at an Amazon warehouse in Staten Island, New York, in April 2022, travelled to the UK last week to provide advice to British workers as they try to gain recognition from the company.
“It’s important that we amplify each other’s fight and struggles because we want to build that international solidarity,” Smalls told the Observer.
“Just like they’re refusing to talk to these workers and negotiate a fair contract, we’re in the same process back at home.”
UK building supplier Travis Perkins warns of challenging 2023
Travis Perkins, Britain’s biggest supplier of building materials, has warned that 2023 will be challenging as housebuilders slow down projects and home-owners delay improvements.
The country’s gloomy economic outlook is likely to weigh on the housing market this year, with Travis Perkins warning that there is “macroeconomic uncertainty”.
Reuters has the details:
Travis Perkins, which sells bricks, timber and new kitchens, as well as equipment for large construction projects, said adjusted operating profit fell 16% last year to £295m, behind a consensus forecast of £320m pounds.
The miss was blamed on restructuring costs from closing 20 smaller branches out of the group’s 1,500, which Chief Financial Officer Alan Williams said was part of Travis Perkin’s plan to prepare for a tougher year.
The surge in grocery inflation to record levels is adding to the pressure on Ocado, says Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown:
Lund-Yates points out that despite a 13% increase in active customers last year, volumes haven’t followed suit, meaning the cost to serve all those online orders has become a burden.
Ocado is in the eye of the cost-of-living storm because its offering isn’t synonymous with being the best value, it’s a higher-end option, without the same benefits of enticing people in with tangible, physical goods like M&S or Waitrose can.
One quarter of British shoppers are struggling as grocery price inflation goes above 17% for the first time, according to new data from Kantar. It was a year ago that food inflation climbed above 4%, meaning consumers now feel like there’s a hole in their wallet every time they reach the checkout.
If you were ill this month, you weren’t alone.
February also saw sales of cold treatments rising by 82%, cough liquids up 78% and cough lozenges 70% higher, Kantar reports.
Aldi and Lidl grow market share
Sales at discount supermarket chains Aldi and Lidl both rose this month, as UK shoppers tried to cut their grocery bills.
Aldi’s market share rose to a new record, of 9.4% this month, and remains the fastest growing grocer, with sales up by 26.7%.
It was closely followed by Lidl which increased sales by 25.4%, growing its market share to 7.1%. Frozen food specialist Iceland also won share, taking 2.4% of market sales, up from 2.3% last year as spending through its tills increased by 10.8%.
Kantar also reports that Ocado “put in a strong performance, bucking the overall trend in online sales”.
Fraser McKevitt, the head of retail and consumer insight, says:
While online fell by 0.9% over the 12 weeks, the digital specialist [Ocado] grew sales by 11.3% to achieve its largest ever market share of 1.9%.
Tesco edged slightly ahead in the battle between Britain’s biggest retailers, with sales up by 6.6%. Sainsbury’s and Asda were just behind with sales rising by 6.2% and 5.9% respectively. Morrisons’ sales decline of 0.9% was its best performance since May 2021.
Waitrose returned to growth, nudging up sales by 0.7%. It has a market share of 4.7%. Convenience retailer Co-op increased sales by 3.4% while independents and symbols were up by 1.8%.
