Retailers have hit back at Chancellor John Healey’s warning to supermarkets that any “profiteering” as a result of the Iran War will not be tolerated.
Healey said he wants to prevent the public being “taken for a ride at the pump or till” – however he acknowledged that there had been “no significant evidence of so-called price gouging” during the crisis. The UK’s competition watchdog, the Competition and Markets Authority (CMA), has published three reports which show no evidence of profiteering among British supermarkets.
The British Retail Consortium (BRC) said supermarkets will resist any claim that they are cashing in on the Middle East crisis. The BRC’s corporate affairs director Jim Bligh told City AM that it was “not helpful for the Chancellor to label retailers as potential profiteers when it’s one of the UK’s lowest margin industries.”
Rather than price gouging, strong competition in the sector – particularly from discounters such as Lidl and Aldi – has acted as a lever to keep prices low. Bligh said: “That competition is also keeping food price inflation down – on which the government has done nothing to support the industry.”
Prices deflated in July
In fact, BRC data shows that prices deflated in supermarkets in July. Shop price inflation decreased to 0.9% year on year in July, against growth of 1.2% in June; non-food inflation decreased to 0.2% year on year in July, against growth of 0.6% in June; and food inflation decreased to 2.2% year on year in July, against growth of 2.4% in June.
The BRC’s chief executive Helen Dickson said the deflation was because retailers “competed hard to limit price rises” but warned that “higher employment costs and packaging taxes, global instability and climate-related disruption” are all making it harder for retailers to get products on shelves.
Difficult times ahead
While the Chancellor undoubtedly has a difficult job ahead ensuring that households are impacted as little as possible by the volatility in the Middle East, his statement risks shifting public blame to retailers for price increases that are unavoidable in a low-margin industry battered by economic headwinds far beyond its control.
Vigilance over pricing is understandable during periods of instability, but from a retail perspective, the real threat to household budgets lies in rising costs throughout the supply chain, not supermarket margins.
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