Tesco sees ‘encouraging early signs’ that grocery inflation is starting to ease
Tesco’s boss has reported “encouraging early signs” that grocery inflation is starting to ease and taken a swipe at the Bank of England over claims of industry profiteering.
The UK’s largest retailer said in a trading update that there was a slowdown in price growth across the market and it was continuing to focus on value for its customers.
Tesco updated on its performance as the food sector faces regulatory scrutiny on its pricing.
Chief executive Ken Murphy told a call with analysts that he believed it was “past the peak of inflation”.
“Hopefully we will see prices moderate through the rest of the year,” he added.
When asked whether it was unfair that the Bank of England was blaming supermarkets for stubbornly high prices, he replied in the affirmative.
It followed remarks by governor Andrew Bailey to MPs that there were signs of food producers rebuilding their profit margins, with the cost of food not reflecting falling commodity costs.
“We react pretty quickly when we see those commodities come down,” Mr Murphy said, adding that sceptics were not taking into account things like higher energy and labour costs across the supply chain.
Tesco is not obliged to give profit figures in its first quarter update but said UK like-for-like sales, excluding fuel, rose 9% to £10.8bn in the 13 weeks to 27 May.
The retailer reiterated its existing guidance for profitability over the full year, meaning there was no upgrade despite the strong sales growth.
The company said that data showed it had “led the market in cutting prices on essential items to support customers”.
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‘Reaching the peak’ of food inflation
Just a week ago, Tesco was accused by a consumer group of a lack of transparency over its Clubcard discounts.
That followed an announcement by the Competition and Markets Authority (CMA) last month that it was examining the wider grocery and fuel industry for any failure of competition that could mean consumers are being overcharged.
Food inflation has proved among the most stubborn elements of the cost of living crisis in recent months, with the rate continuing to run above 19%.
While the bitter rivalry between chains, including the discounters, and diversity of choice has long been credited for healthy competition in the grocery sector, there are concerns they have been too slow to pass on wholesale price cuts.
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Supermarket competition ensures value
On the fuel issue, pump prices have fallen sharply since large disparities between delivery and pump costs were flagged.
The government has warned it is examining the potential for food price caps amid frustration that grocery costs have been slow to follow suit.
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Government looks at food price cap
The sector argues that punitive costs remain, especially in the supply chain, with energy and labour among the factors weighing heavily across the board.
Tesco shares fell 1% in early deals following its update.
Mr Murphy said of the company’s performance: “Customers continue to recognise our leading combination of great value and quality in every part of their basket – from essentials covered by our Aldi Price Match, through to our growing Finest range.
“We are very conscious that many of our customers continue to face significant cost of living pressures and we have led the way in cutting prices on everyday essential items.
“There are encouraging early signs that inflation is starting to ease across the market and we will keep working tirelessly to ensure customers receive the best possible value at Tesco.”
Waspi campaigners have threatened legal action against the government unless it reconsiders its decision to reject compensation.
In December, the government said it would not be compensating millions of women born in the 1950s – known as Waspi women – who say they were not given sufficient warning of the state pension age for women being lifted from 60 to 65.
It was due to be phased in over 10 years from 2010, but in 2011 was sped up to be reached by 2018, then rose to the age of 66 in 2020.
A watchdog had recommended that compensation be paid to those affected, but Sir Keir Starmer said at the time that taxpayers could not afford what could have been a £10.5bn package.
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From December: No pay out for ‘waspi’ pension women
On Monday, the Waspi campaign said it had sent a “letter before action” to the Department for Work and Pensions (DWP) warning the government of High Court proceedings if no action is taken.
Angela Madden, chair of Waspi (Women Against State Pension Inequality) campaign group, said members will not allow the DWP’s “gaslighting” of victims to go “unchallenged”.
She said: “The government has accepted that 1950s-born women are victims of maladministration, but it now says none of us suffered any injustice. We believe this is not only an outrage but legally wrong.
“We have been successful before and we are confident we will be again. But what would be better for everyone is if the Secretary of State (Liz Kendall) now saw sense and came to the table to sort out a compensation package.
“The alternative is continued defence of the indefensible but this time in front of a judge.”
The group has launched a £75,000 CrowdJustice campaign to fund legal action, and said the government has 14 days to respond before the case is filed.
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What is a Waspi woman and what happened to them?
About 3.6 million women were affected by their state pension age being lifted from 60 to 65. File pic: PA
In the mid-1990s, the government passed a law to raise the retirement age for women over a 10-year period to make it equal to men.
The Conservative-Liberal Democrat coalition government in the early 2010s under David Cameron and Nick Clegg then sped up the timetable as part of its cost-cutting measures.
In 2011, a new Pensions Act was introduced that not only shortened the timetable to increase the women’s pension age to 65 by two years but also raised the overall pension age to 66 by October 2020 – saving the government around £30bn.
About 3.6 million women in the UK were affected – as many complained they weren’t appropriately notified of the changes and some only received letters about it 14 years after the legislation passed.
While in opposition, Rachel Reeves, now the chancellor, and Liz Kendall, now pensions secretary, were among several Labour MPs who supported the Waspi women’s campaign.
The now-Chancellor said in a 2016 debate that women affected by the increase in state pension age had been “done and injustice” and urged the government to “think again”.
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A government spokesperson said: “We accept the Ombudsman’s finding of maladministration and have apologised for there being a 28-month delay in writing to 1950s-born women.
“However, evidence showed only one in four people remember reading and receiving letters that they weren’t expecting and that by 2006, 90% of 1950s-born women knew that the state pension age was changing.
“Earlier letters wouldn’t have affected this. For these and other reasons, the government cannot justify paying for a £10.5 billion compensation scheme at the expense of the taxpayer.”
Russian oligarchs with links to the Kremlin can now be banned from the UK, the government has announced as part of a fresh sanctions package on the third anniversary of Vladimir Putin’s invasion of Ukraine.
The Home Office said “elites” linked to the Russian state can now be prevented from entering the UK under the new sanctions.
Those who could be banned include anyone who provides “significant support” to the Kremlin, those who owe their “significant status or wealth” to the Russian state, and those “who enjoy access to the highest levels” of the regime.
The announcement has been timed to coincide with the three-year anniversary of Russia’s invasion of Ukraine.
Another set of sanctions is expected from the Foreign Office on Monday.
Security minister Dan Jarvis said: “Border security is national security, and we will use all the tools at our disposal to protect our country against the threat from Russia.
“The measures announced today slam the door shut to the oligarchs who have enriched themselves at the expense of the Russian people whilst bankrolling this illegal and unjustifiable war.
“My message to Putin’s friends in Moscow is simple: you are not welcome in the UK.”
The UK government said Kremlin-linked elites can pose a “real and present danger to our way of life” as they denounce British values in public “while enjoying the benefits of the UK in private”.
It said they can act as “tools” for the Russian state to enable President Putin’s aggression in Ukraine and beyond.
Shortly after the war in Ukraine started on 24 February 2022, the UK imposed financial sanctions on oligarchs, including closing legal loopholes used to launder money.
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In November last year, Operation Destabilise, run by the National Crime Agency (NCA), successfully disrupted two billion-dollar Russian money laundering networks operating around the world, including in the UK which was a key hub.
They provided services to Russian oligarchs and were helping fund Kremlin espionage operations.
Ekatarina Zhdanova is said to have run a money laundering network called Smart that has been shut down. Pic: NCA
One of the key players was identified as Ekaterina Zhdanova who is alleged to have run a money laundering network called Smart. She was sanctioned by the US in November last year and is currently in French custody awaiting a trial.
A total of 84 arrests were made under Operation Destabilise in November and more than £20m in illicit funds seized.
The NCA has made a further six arrests since then and seized £1m more in case.
The networks also helped Russian clients to illegally bypass financial restrictions to invest money in the UK.
US officials have been in talks with their Russian counterparts in Saudi Arabia over the future of Ukraine for the past week.
However, neither Ukraine nor any European country was at the table, with Ukrainian President Volodymyr Zelenskyy saying he will not accept any peace deal Kyiv is not involved in.
Sir Keir Starmer has backed Mr Zelenskyy on that so all eyes will be on the prime minister when he visits Mr Trump in Washington DC this week.
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