Grocery inflation hits new record high – and the worst is yet to come

Published

1 year ago

March 28, 2023

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UK grocery inflation has hit a new record high – with customers now paying hundreds more a year – but there are warnings the worst is yet to come.

As inflation for food hits 17.5%, Kantar Worldpanel reported households are now facing a potential £837 hike in the annual cost of their regular basket – although consumers are increasingly shopping around in a bid to find the best value.

Its latest report said footfall was up in “every single grocer” over the four weeks to March 19, with households now visiting three or more of the top 10 retailers per month on average – with chains “battling it out” to get buyers through their doors.

But amid concerns over the impact of salad shortages in some UK supermarkets, Kantar said shoppers had instead turned to independents to plug any gaps in availability.

Its head of retail and consumer insight, Fraser McKevitt, said: “Despite concerns about shortages, the number of baskets containing tomatoes, cucumbers or peppers in the 10 major grocers stayed at 17% in March, the same as February.

“For any shoppers who couldn’t get what they wanted in larger supermarkets, the independents stepped in, with the volumes of tomatoes, peppers and cucumbers in baskets rising by 32%, 26% and 21% respectively in these stores.”

‘The worst is yet to come’

Shop prices are now 8.9% higher than they were a year ago, up from February’s 8.4% increase, according to the British Retail Consortium (BRC)-NielsenIQ index.

The rising cost of sugar, coupled with high manufacturing costs, has contributed to price rises for chocolate, sweets and fizzy drinks. Fruit and vegetable prices have also risen as poor harvests in Europe and North Africa limited availability.

But there are warnings the UK has not seen the worst of the surging prices.

BRC chief executive Helen Dickinson said: “Shop price inflation has yet to peak.

“Food price rises will likely ease in the coming months, particularly as we enter the UK growing season, but wider inflation is expected to remain high.”

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Mike Watkins, head of retailer and business insight at NielsenIQ, said: “Inflation continues to have an impact on the spending power of shoppers and increased energy bills from April will add more pressure.”

“Since food prices have risen retailers have seen more visits but less basket spend, as shoppers manage their weekly food bills by shopping little and more often and seeking out the lowest prices.

“And as Easter approaches some high street retailers will also be offering discounts and promotions to encourage customers to spend.”

The fastest-growing supermarkets

Mr McKevitt said shoppers were increasingly taking advantage of store loyalty cards, with nine in ten consumers having one in their wallet, while shoppers are also picking more own-label lines, sales of which are up by 15.8% during the period compared to last year.

But he added: “People are keeping some space in their baskets for the brands they know and love. Outside the discounters Aldi and Lidl, branded goods still make up 52% of the market and sales grew by 7.2% over the past month, the fastest rate we’ve seen since February 2021.

Kantar said Lidl was the fastest growing supermarket with sales rising by 25.8%, earning it a market share of 7.4%.

Tesco remains Britain’s largest grocer with a 26.9% share of the market, while Sainsbury’s is on 14.8% and Asda 14.3%, according to the data.

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IMF upgrades UK growth forecast but issues fresh warning on national insurance cuts and debt

Published

14 hours ago

May 21, 2024

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IMF upgrades UK growth forecast but issues fresh warning on national insurance cuts and debt

The International Monetary Fund (IMF) has said the UK economy is heading for a “soft landing” but reiterated its message to Jeremy Hunt that he should not have cut national insurance at the last two fiscal events.

In its annual check-up on the state of Britain’s economy, the Washington-based Fund also warned of a black hole in the public finances, with £30bn of spending cuts or tax rises needed to stabilise the national debt.

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The fund raised its forecast for gross domestic product growth this year from 0.5% to 0.7%, saying: “The UK economy is approaching a soft landing, with a recovery in growth expected in 2024, strengthening in 2025.”

It now expects inflation to come down to close to 2% in the coming months, and the Bank of England to cut interest rates by as much as three-quarters of a percent this year, and then another percentage point next year.

The chancellor welcomed the fund’s article IV report, saying: “Today’s report clearly shows that independent international economists agree that the UK economy has turned a corner and is on course for a soft landing.

“The IMF have upgraded our growth for this year and forecast we will grow faster than any other large European country over the next six years – so it is time to shake off some of the unjustified pessimism about our prospects.”

However, the IMF – which has warned the government explicitly in the past not to cut taxes too fast in the face of rising spending projections in future – said that the two 2p national insurance contribution (NIC) cuts at the last two fiscal events were a mistake.

“In light of the medium-term fiscal challenge,” the report said. “Staff would have recommended against the NIC rate cuts, given their significant cost.”

The fund’s staff also believe that the government is not on track to meet its main fiscal rule, which commits it to cutting the national debt in five years time.

It believes net debt will carry on rising towards 97% of GDP in the following years, instead of falling back to 93% of GDP, as the Office for Budget Responsibility has forecast.

The fund’s double-edged report comes amid improving news for the UK.

Data released two weeks ago showed the country ended its short-lived recession with faster-than-expected growth in the first quarter of the year.

The Office for National Statistics is also expected to announce tomorrow that inflation dropped down close to the Bank of England’s 2% target in April.

That may enable the Bank to begin cutting interest rates from their 5.25% level in June or August.

The fund’s report contained a number of other recommendations for economic policy in the UK, including that the Bank of England should commit to more press conferences to explain its decisions, and that the government should consider imposing road charges to replace the revenue lost from fuel duty as electric cars become more predominant on UK roads.

Business

Superdry plots emergency sale process if creditors block rescue plan

Published

18 hours ago

May 21, 2024

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Superdry plots emergency sale process if creditors block rescue plan

Superdry is preparing to run an emergency four-week sale process if creditors block its founder’s plans to inject up to £10m of his own money into the fashion chain in a bid to stave off insolvency.

Sky News has learnt that the accelerated M&A process would be launched if a restructuring plan is not approved by creditors in the coming weeks.

Under the proposed survival plan, Julian Dunkerton would stump up either £8m in an open offer available to other shareholders or £10m in a placing that would only be accessible to him.

The share sale would precede Superdry’s delisting from the London Stock Exchange.

The restructuring plan would need to be approved by creditors, including landlords, in the coming weeks.

According to a document circulated to creditors in recent days and seen by Sky News, rejection of the restructuring plan would be followed by a four-week sale process for Superdry, with the likely outcome of a pre-pack administration deal.

Sources said that Mr Dunkerton’s willingness to inject such a substantial chunk of his own fortune into the company reflected his confidence in the company’s turnaround prospects.

Superdry’s shares have slumped to a series of record lows in recent months amid dire trading and a failed sale process.

Last month, Sky News revealed that M&G, the asset manager which owns Superdry’s flagship store in central London, was weighing a challenge to its rescue plan.

M&G is believed to have been alarmed by the absence of their participation in a mechanism to allow creditors to benefit from any future recovery in the retailer’s performance.

The restructuring plan will not entail immediate shop closures but will impose sizeable rent cuts on landlords of dozens of Superdry outlets.

Sources said the firm is also planning to pull out of a number of overseas markets, including the US.

On Tuesday morning, shares in the company were trading at around 6.7p, giving the indebted company a market capitalisation of less than £7m.

It recently agreed an increased borrowing capacity with Hilco Capital, one of its existing lenders, while it also owes tens of millions of pounds to Bantry Bay.

Mr Dunkerton, who in 2019 returned to the company having previously been ousted, owns just under 30% of the shares.

In recent months, Superdry has raised cash by offloading its brand in regions including India and Asia-Pacific.

Superdry declined to comment.

Business

South West Water: Surge in profits for parent company of utility responsible for fixing contaminated supply in Devon

Published

19 hours ago

May 21, 2024

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South West Water: Surge in profits for parent company of utility responsible for fixing contaminated supply in Devon

The parent company of South West Water has insisted it is focused on returning safe water supply to Brixham in Devon as it announced an 8.6% increase in underlying operating profits to £166.3m.

Around 17,000 households in the Brixham area have been told to boil their drinking water since last week following an outbreak of cryptosporidiosis which left hundreds of people ill.

The condition, which can lead to vomiting and diarrhoea, is caused by a water-born parasite, and South West Water has said it was most likely triggered by animal faeces entering a damaged pipe.

Pennon Group, the listed company which owns South West Water, Bournemouth Water and Bristol Water, said normal service had been returned to 85% of customers as it announced its annual financial results.

“Whilst the results we are announcing today are based on our performance for the last financial year, we are 100% focused on returning a safe water supply to the people and businesses in and around Brixham,” said Susan Davy, the group chief executive.

“Normal service has returned for 85% of customers, but we won’t stop until the local drinking water is returned to the quality all our customers expect and deserve. Our absolute priority continues to be the health and safety of our customers and our operational teams are working tirelessly around the clock to deliver this.”

The company also revealed it is paying out about £3.5m in compensation to customers affected by the parasite outbreak in Devon.

‘Robust’ results – but firm defends money for shareholders

Describing financial results which include a 10% increase in revenues to more than £907m as “robust”, Ms Davy said dividend payments to shareholders, increasing by 3.8% to 44.37 pence per share, had been reduced to cover the cost of a £2.4m fine for multiple pollution incidents.

“At a time when media, public and regulatory scrutiny is high, it is important we do what is right for all. In the context of the wider group performance, we have carefully considered Ofwat’s new dividend guidance for water businesses. We have… adjusted the final dividend quantum by £2.4m, equivalent to the South West Water Court fine in 2023/24, signalling we are listening, clearing the way for long-term shareholder value.”

Pennon Group’s net debt rose by 10% to £5.18bn, a debt ratio of more than 63%, and capital expenditure rose by almost 80% to £642.4m.

Water companies are currently negotiating with regulator Ofwat over their spending and revenue plans for the next five years, and South West Water has proposed a 20% increase in customer bills.