THE STERLING CRISIS
Shoppers face 5% rise as new low is worse than ‘Project Fear’
RETAILERS are poised to impose a wave of price rises that could add 5 per cent to shopping bills in the new year after the pound plunged by more than the worst forecast of so-called ‘Project Fear’.
The hikes, expected to hit soon after Christmas, will cost consumers an estimated £15billion next year.
A slew of executives from supermarkets, fashion retailers and suppliers have issued warnings. Most declined to be named – saying the issue has become too political – but all predicted price rises of at least 5 per cent.
David Sables, a consultant at Sentinel who advises retail suppliers in their negotiations with supermarkets, said suppliers would need to demand higher prices for their own survival. ‘Some suppliers might go bust if they don’t show resolve,’ he said. ‘Prices will go up across the board. I’m hearing 5 per cent.’
A senior supermarket executive also predicted a 5 per cent figure for grocery price rises. And food industry veteran Lord Haskins, the former chairman of Northern Foods whose brands include Goodfella Pizza and Fox’s biscuits, said: ‘That is certainly the figure I am thinking we will see.’
One leading fashion retail boss told The Mail on Sunday he was already seeing suppliers asking for price rises of 10 per cent.
Sables warned that the recent spat between Tesco and Unilever was only the most public example of a situation replicated across the industry. ‘This is something consumers need to get used to,’ he said. ‘Suppliers operating in dollars or euros have had a 15 per cent rise in their costs as a result of the referendum and more recently because of the lack of any plan following that. This is a major issue and it is coming to your shelves soon.’
Well over half the goods sold in UK shops are imported. Retail executives said this would mean the slump in the pound would result in an average price hike of at least 7.5 per cent. Some of that increase could be absorbed by suppliers and retailers, but about 5 per cent would end up being paid by shoppers.
Sables said retail spending in Britain totalled
£300billion so a 5 per cent price rise would amount to £15billion.
Andrew Underwood, of accountants KPMG, advises firms on supply chain issues. He said ‘thousands’ of price hikes were on the cards and the increases could be as high as 8 per cent on certain products. ‘The price moves we have seen so far are the tip of the iceberg,’ he said. Sir Ken Morrison, life president at Morrisons, said: ‘Price rises can depend on all sorts of things – the climate, the yields on the crops. But retailers will be scratching their heads because we have effectively had a devaluation in the pound. As a country we are worse off.’
One retail chief, who declined to be named, said the industry is facing a fall in the pound that was greater than the Treasury predicted before the referendum.
Treasury forecasts – derided by critics as Project Fear – suggested a Leave vote could lead to a shock scenario in which sterling would fall by 12 per cent against a basket of other currencies. It said a less likely but possible ‘severe shock’ would mean a 15 per cent drop. On Friday the pound was down 16 per cent.
Meanwhile, Bank of England governor Mark Carney said last week that the Bank could allow inflation to break through its target level of 2 per cent to boost economic growth.