David Cameron’s infamous struggle to answer the price of bread question a decade ago resonated with the public, highlighting the Tories’ disconnect with the cost of living crisis. Fast forward to today, and Prime Minister Rishi Sunak and Chancellor Jeremy Hunt are facing similar accusations of cluelessness. In just ten years, the price of an average white loaf has risen from 47p to £1.37, putting pressure on not only politicians but also companies across various sectors.
Ryanair, for instance, is expected to report record profits this year after raising flight prices by up to 20% this summer. Food prices have skyrocketed by over 20% since 2020, leading supermarket giants Tesco and Sainsbury to enjoy their best profit margins in ten years. Multinational corporations like PepsiCo, Proctor & Gamble, and Nestlé have continued to promise hefty dividends to shareholders while maintaining solid profits. This begs the question: why are businesses thriving while households face falling real incomes?
With UK inflation at 8.7% in May and food inflation at a staggering 18%, compared to lower prices in Europe and the US, consumer trust in UK supermarkets has plummeted to a nine-year low. Consequently, Hunt called on the Competition and Markets Authority (CMA) and other regulatory bodies to investigate potential profiteering in their respective sectors.
The CMA has already received evidence of “profiteering” in retail, similar to what was uncovered in the energy sector, resulting in a windfall tax. While supermarket bosses deny inflating profit margins during the cost-of-living crisis, there is enough evidence for the CMA to propose the establishment of a taskforce to monitor grocery pricing.
Economists have started attributing rising prices to the significant profits made by companies, with the European Central Bank and the International Monetary Fund pointing out the role of profiteering in eurozone inflation. The UK, in particular, has seen remarkably resilient corporate margins, with inflation being four percentage points higher than it would have been without rising costs.
A Unite union report reveals how the top 350 companies listed on the London Stock Exchange experienced a rise in average profit margins from 5.7% in the first half of 2019 to 10.7% in the first half of 2022. This supports the notion that profit margin-led inflation has contributed to the surge in prices.
The energy industry is a prime example of profiteering, with commodity traders making billions in net income and electricity and gas distribution companies boasting high profit margins. Shipping oil and liquid gas has also been highly lucrative, generating more profit in three years than the previous six decades combined.
Mortgage costs have surged, adding an extra £3,000 per year for households with an average mortgage of £130,000. The Resolution Foundation suggests that the stickiness of inflation has led to expectations of higher interest rates, resulting in increased mortgage repayments.
While banks argue that they are not profiteering due to intense competition, the slim margin between borrowing costs and customer interest rates casts doubt on their justification.
In conclusion, the evidence suggests that many sectors are indeed engaged in profit-driven practices, contributing to the cost of living crisis faced by UK households. The authorities, including the CMA, are stepping in to address these concerns and monitor pricing in various industries.
Denial of responsibility! VigourTimes is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.
