The UK’s competition watchdog has announced that it will increase its scrutiny of the country’s supermarkets, following a surge in grocery inflation to 19%. While official data showed that UK food prices reached a 46-year high in March, they did drop slightly in April to 17.3%, according to industry data. Despite this, the watchdog has not yet identified any specific concerns in the sector. “Given ongoing concerns about high prices, we are announcing the stepping-up of our work in the grocery sector to understand whether any failure in competition is contributing to grocery prices being higher than they would be in a well-functioning market,” the competition and markets authority said.
The Bank of England has also expressed concern over rising food prices, stating last week that it expects overall inflation to fall more slowly than anticipated due to unexpectedly large and persistent increases in food prices. Meanwhile, Irish supermarkets are expected to be given six weeks to bring down the cost of a basket of groceries. Earlier this month, the French government pledged to take action against food retailers who fail to pass on lower wholesale prices to consumers.
In the UK, the opposition Liberal Democrats party has called for an investigation into supermarket profits. However, supermarket groups, including market leader Tesco, have denied profiteering and have stated that they have taken a hit to earnings, with operating margins of 4% or less. In comparison, consumer goods firms such as Unilever and Nestlé have margins of 16% to 17%.
In other regulatory news, a British regulator has launched an investigation into Royal Mail’s failure to meet delivery targets in the past year. The communications regulator Ofcom has stated that it will consider whether there were any exceptional events beyond the company’s control that may explain why it missed its targets. Royal Mail has blamed union disputes that caused strike action and affected operations for its failure to meet delivery targets for 2022-2023.
It is clear that the issue of rising food prices is a concern not only in the UK, but also in other parts of Europe. While the competition watchdog has not yet identified any specific concerns in the sector, the increased scrutiny of supermarkets is a welcome development for consumers who are struggling to cope with high prices. It remains to be seen how effective this scrutiny will be in bringing prices down, but it is clear that action needs to be taken to address this issue.
