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Unilever v Tesco spat could be start of New Year price rises for shoppers

Published 13/10/2016

The pressure of the plummeting pound is likely to cause price rises, analysts have said
The pressure of the plummeting pound is likely to cause price rises, analysts have said

Consumers could face a New Year surge in prices as experts warned the Tesco spat with Unilever was just the "thin end of the wedge".

Steven Dresser, retail analyst at Grocery Insight, said there was likely to be a round of price hikes in January as retailers look to pass on higher costs once the festive season is out the way.

Retailers are facing rising costs of goods and materials from the plunging value of the pound since the Brexit vote, but are under pressure to keep prices low amid an intensely competitive market.

Mr Dresser said the Tesco row over prices with Unilever was a "pre-cursor" to other moves by suppliers to put up the costs of their products.

He added: "No one wants to put prices up ahead of Christmas. Others may just wait until January."

"It's only going to get more painful," he cautioned.

Former chief executives of Tesco, Sainsbury's, Asda, Morrisons, Marks & Spencer and B&Q all warned ahead of the EU referendum that a drop in the pound - coupled with supply chain disruption - would cause prices to spike.

The Tesco stand-off with Unilever came hours after former Sainsbury's boss Justin King said shoppers should expect price rises after the fall in the value of the pound since the Brexit vote.

Laith Khalaf, senior analyst at Hargreaves Lansdown, said the pricing spat was likely to be the " thin end of the wedge".

"This kind of friction is an inevitable result of the unstoppable force of higher import costs hitting the immovable object of UK retail pricing," he added.

Supermarkets are already taking a hit amid a fierce price war in the sector sparked off by the rising popularity of discounters Aldi and Lidl.

Consumers have been enjoying four years in a row of falling retail prices, but the pressures of the weak pound is set to bring this to an end.

The British Retail Consortium warned earlier this week that Brexit could leave retailers with no option but to pass on costs to consumers.

It said: "While UK retailers have been very successful in insulating consumers from the cost of rising business rates and labour, the recent devaluation of the pound in relation to our most important trading currencies is compounding economic headwinds, while years of deflation have left little margin to absorb added cost from import tariffs and administrative burdens."

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