The cost-of-living crisis continues to pinch the pockets of hard-working Britons. As Sky News recently reported, average prices of food and non-alcoholic drinks in the United Kingdom has risen to 19.1 per cent compared to March 2022. This is the largest twelve-month increase in forty-five years, with Britons having to pay almost fifty per cent more for everyday essential items such as olive oil, sugar and eggs.
Experts had hoped that inflation figures would begin to dramatically fall as global energy prices and food prices on international commodity markets decrease. However, as chief economist at the Office for National Statistics Grant Fitzner recently explained, UK inflation remains at a stubbornly ‘high level’ and falling motor fuel prices ‘were partially offset by the cost of food, which is still climbing steeply’. This disproportionately punishes low-income individuals, who utilise a larger share of their wages on everyday essentials compared to those on higher incomes. A recent survey by GamCare revealed that those low-income earners struggling to keep up with rising food prices are turning to gambling.
The reasons for this stubbornly high food and non-alcoholic drinks inflation rate are complex, multifaceted and occasionally UK-specific. Sky News compiled a detailed list, which included recent poor harvests in Europe and North Africa leading to supply issues, more expensive imports due to the weak Pound, rising transport costs and the Russian invasion of Ukraine leading to energy prices being higher as Europe halted using Russian gas. It also included the implications of Britain leaving the European Union and the single market, with the media outlet claiming the fallout had led to an increase of ‘hundreds of pounds to the average UK shopping bill’.
There is, however, a growing acceptance amongst some commentators that an additional strand is keeping prices high in the supermarkets. The head of the Centre for Economic Justice, George Dibb, recently stated that policymakers need to ‘look at greedflation and prioritise reining in corporate profits, instead of blaming workers’ wages for driving up inflation’.
Those that accept an element of ‘greedflation’ is occurring in the UK believe that supermarkets and food manufacturers are unfairly benefitting from drought, warfare and the post-pandemic recovery, with large corporations systematically profiteering to boost profit margins. Will Dunn from the New Statesman argues that, because of the current and arguably unprecedented volatile economic and political environment, UK customers both ‘expect’ and even ‘tolerate’ an element of price rises, as large companies have a ‘convincing story’ to portray to their customers. It is the idea that companies have no choice but to raise tubs of butter to over £7 because of the eclectic mix of unfortunate circumstances the UK is experiencing.
The Unite trade union undertook analysis of the top 350 companies listed on the London Stock Exchange, confirming that average profit margins increased from 5.7 per cent in the first six months of 2019, to 10.7 per cent in the first six months of 2022. Profits and share prices have been able to increase post-pandemic, whilst many public sector wages have experienced real terms cut since 2010.
Some figures at the Bank of England concur, with a member of the Monetary Policy Committee expressing concerns about ‘the extent to which there is strong pricing power among firms and acceptance of those price rises by a lot of consumers’. Tesco have been accused of making an ‘obscene profit’, and Sainsbury’s shares are up 75 per cent since October 2022.
Further analysis will be essential in the coming months to determine just how much influence ‘greedflation’ is having on stubbornly high food and non-alcoholic drink prices in the UK. Only then will analysts and policymakers be able to definitively determine whether large corporations are not letting a good crisis go to waste.
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