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'Cheapest Christmas ever' on the cards amid supermarket price war

Published 12/09/2016

Asda and Morrisons have slashed prices on hundreds of groceries - Tesco and Sainsbury's are expected to follow suit
Asda and Morrisons have slashed prices on hundreds of groceries - Tesco and Sainsbury's are expected to follow suit

British grocery shoppers can look forward to one of the cheapest Christmases ever as the raging supermarket price war shows no sign of abating.

Experts believe that Tesco and Sainsbury's will follow Asda and Morrisons in slashing their prices, resulting in a bargain basement festive season.

"We've had three years of food price deflation so far, so it's likely that it could be cheapest Christmas ever," Thomas Wharram, a research associate at Bernstein, said, while warning that prices could rise in the longer term.

Earlier this month, Morrisons announced plans to cut selected meat and poultry prices by 12%. The move marks the Bradford-based company's second post-Brexit price reduction after cutting prices on more than 1,000 products by an average of 18% at the start of August.

Asda followed suit, with the Walmart-owned company saying it would lower thousands of prices on products including beef, chicken and sausages.

"It is fair to think that Tesco and Sainsbury will be next," Nicla Di Palma, an equity analyst at wealth manager Brewin Dolphin, said.

Asda, Tesco, Morrisons and Sainsbury's are attempting to fend off the challenge from German upstarts Aldi and Lidl, which have both taken market share from the so-called Big Four.

Clive Black, retail analyst at Shore Capital, stopped short of forecasting the cheapest Christmas on record, but said shoppers would hold the upper hand during the holidays.

"The reality is that the UK retail scene very competitive, as supermarket groups try fight back against the damage discounters are doing to them," Mr Black said.

"It's going to be a competitive Christmas, and a good Christmas for consumers who tend to benefit when there is intense competition, especially in the battle around fresh foods.

"We've seen more from Morrisons, more from Asda, and we expect Tesco to chip away at prices and we don't expect discounters to sit on their hands."

However, there was also a warning that shoppers would be punished in 2017 as a result of the collapse in sterling driving up import costs.

"Will it be cheaper than 2015? Probably. Will 2017 be more expensive? If pound remains where it is, certainly," Mr Black said.

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