The announcement confirming the UK’s decision to leave the European Union (EU) will trigger a series of price rises, according to pricing specialist Simon-Kucher.
Prime minister Theresa May is expected to trigger Article 50 – the mechanism by which a country withdraws from the EU – in around a week’s time.
But Simon-Kucher managing director Mark Billige warned that the announcement would worsen a gradual increase in consumer prices seen since the UK’s Brexit vote.
Inflation, as recorded by the consumer price index (CPI), increased 2.3% in the year to February 2017, up from 1.8% in January. Today’s figure is the highest it has been since September 2013.
Billige said: “After the referendum we have already seen a notable impact on prices, with the inflation rate before the vote hovering just above 0% but now crossing 2% – the official target rate of inflation in the UK. Research by Simon-Kucher shows that the severity of price increases passed on to consumers has been gradually rising since the referendum. This means that, as we move closer to the point at which Theresa May looks like she will trigger Article 50 at the end of this month, companies look set to pull the trigger on increasingly significant price hikes.”
Simon-Kucher’s survey also shows that the level of concern about consumer price increases resulting from Brexit varies according to political views.
Of those who voted to remain within the EU, 97% said that they were concerned about rising prices; in contrast, only 57% of those who voted to leave said the same.
It comes amid a difficult retail landscape in which supermarkets like Tesco have fought to fend off increased prices in order to retain their market share.
The retail giant found itself caught in a very public dispute with Unilever in October, after refusing to accept a wholesale increase to the cost of its products, which include Marmite, Ben & Jerry’s ice cream and PG Tips tea. Unilever eventually settled the dispute, reportedly with concessions.
Billige continued: “In 2016 the bitter price war between supermarkets meant we saw declining grocery prices, but this year it looks like it will be a different story. While the competition is no less relentless, with the devaluation of sterling since the referendum increasing costs and supplier margins already squeezed, consumers look set to face higher food bills as the supermarkets put through price increases.”
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