(Bloomberg) -- British retailers pushed back against the government’s plans for voluntary price limits on basic food items like bread and milk to tackle inflation and protect struggling Britons against rising costs.
The UK’s food industry is already very efficient and shouldn’t be interfered with, Stuart Rose, chair of Asda and former CEO and chair of Marks & Spencer Group Plc, told journalists in a call on Tuesday. Meanwhile the British Retail Consortium suggested the proposals wouldn’t alleviate the burden on consumers.
“We do a very good job for consumers and if the government wants to start doing ‘relatively clumsy things’ they need be careful about the unintended consequences of what they want to do,” Rose said. “Let the shopkeepers do what they do well, shop keep.” Rose didn’t elaborate on potential consequences.
Ministers in Prime Minister Rishi Sunak’s government are concerned by food price inflation that’s proved particularly sticky, with Office for National Statistics data last week putting it at 19% — close to the highest rate in more than 45 years. Sunak has made halving overall inflation this year one of his five core pledges to voters.
But Rose’s remarks highlight there’s little appetite among grocers to follow through on government proposals for price caps, which if introduced, would be the strongest attempt to manage food costs since controls established by Conservative Prime Minister Edward Heath in the 1970s.
“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,” said Andrew Opie, director of food and sustainability at the BRC. He said the plan “will not make a jot of difference to prices” because “high food prices are a direct result of the soaring cost of energy, transport, and labor, as well as higher prices paid to food manufacturers and farmers.”
Tesco Plc, J Sainsbury Plc and Marks & Spencer Group Plc declined to comment but backed the BRC’s remarks.
Cabinet minister Steve Barclay at the weekend told the BBC that there would be no “compulsion” for grocers, a point reiterated on Tuesday by Sunak’s spokesman, Max Blain. Blain said no decision has yet been made on the matter, but that if any policy were put in place, it would be voluntary and not enforced by the government.
The UK government is speaking regularly to food retailers about prices, Blain said.
With food starting to outpace energy in its contribution to inflation, retailers are tackling accusations that they are profiteering from higher prices. Tesco, Sainsbury and Asda have all reported a decline in profit in the past year as they try to absorb some of the impact of rising costs.
Moreover, grocers have recently announced some price drops on key items like milk, bread and butter. Earlier this month Tesco extended its cuts to include pasta and cooking oils while Sainsbury said Tuesday it has lowered prices on more than 40 dairy products including cheese, yogurt and cream.
The British proposal is reminiscent of an agreement in France, where retailers agreed to charge the “lowest possible amount” for some essential items. Earlier this month, French finance minister Bruno Le Maire announced an extension of the initiative.
Hungary and Croatia have also introduced price controls on groceries, according to Capital Economics Group Chief Economist Neil Shearing. The current situation with UK food prices doesn’t warrant intervention by government, he said.
“Viewed in purely political terms, it is clear what is motivating governments,” Shearing wrote in a note. “Consumers – voters – are acutely sensitive to the price of food because they buy it so much and so often.”
--With assistance from Tom Rees and Alex Wickham.
©2023 Bloomberg L.P.
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