UK rules out mandatory supermarket price caps
Government Response and Industry Reactions
By James Davey
LONDON, May 20 (Reuters) - Britain's government ruled out mandatory supermarket price caps on Wednesday, but said it was in talks with the sector on ways to ease cost-of-living pressures partly driven by the Iran war.
Prime Minister Keir Starmer, facing potential leadership challenges after a heavy local election defeat this month, is pushing departments to shield households from rising prices.
Suggestions of price caps, however, drew a sharp backlash.
Industry Opposition to Price Caps
'Preposterous' Idea, Says M&S
Marks & Spencer Chief Executive Stuart Machin called the idea "completely preposterous".
On Tuesday, a Financial Times report, later confirmed by Reuters, said the government was asking major supermarkets to introduce price caps on key products such as eggs, bread and milk, in exchange for delaying levies and relaxing regulations.
A day later, the government played down the proposal.
“The specific idea of government imposed or mandated price caps isn’t something that we are considering, but as you would expect, we are continuing to have constructive conversations with supermarkets on how we can work together to reduce cost pressures on households," a spokesperson for Starmer said.
Scottish National Party's Approach
The Scottish National Party, which holds power in Scotland's devolved parliament, has announced a plan to introduce a maximum price for "essential" supermarket items.
Retailers' Perspective
"I don't think the government should be trying to run business. I think they should probably try to understand business better," Machin told reporters after M&S reported annual results.
He said many retailers, including M&S, already sold staples such as milk, bread and bananas at a loss, adding that easing tax and regulatory pressures would do more to curb food inflation.
The sector says recent government measures - higher employer taxes, a rise in the minimum wage, new packaging levies and proposed product reformulations - were already stoking inflation before added pressure from the Middle East conflict.
Government and Regulatory Stance
Finance Ministry's Position
Asked about the FT report, a finance ministry spokesperson said on Tuesday that finance minister Rachel Reeves "has been clear we want to do more to help keep costs down for families, and will set out more detail in due course". She is due to speak on Thursday.
Bank of England's View
Speaking to lawmakers on parliament's Treasury Committee, Bank of England Governor Andrew Bailey suggested that food price caps were unsustainable.
Long-term Sustainability Concerns
"If you start doing it as a matter of course ... you're sort of artificially moving prices relative to costs and that's not a sustainable thing in the long run," he said.
Food Price Pressures and Market Reactions
Recent Food Inflation Data
Official data on Wednesday showed food inflation eased to 3.0% in April, but the Bank of England has said firms it spoke to last month expect it to reach 6% to 7% later this year.
Retail Consortium's Response
The British Retail Consortium, which represents major supermarket groups including market leader Tesco and Sainsbury's, said it opposed price caps.
"Rather than introduce 1970s-style price controls and trying to force retailers to sell goods at a loss, the government must focus on how it will reduce the public policy costs which are pushing up food prices in the first place," BRC CEO Helen Dickinson said.
Competition Regulator's Findings
A 2023 investigation by Britain's competition regulator cleared supermarket groups of profiteering during a cost-of-living crisis, when food inflation peaked at 19%.
Future Regulatory Actions
On Wednesday, Reeves said she will give the Competition and Markets Authority stronger powers to crack down on companies found to have raised prices unfairly during crises.
(Reporting by James Davey; Additional reporting by Alistair Smout, Muvija M, Andrew MacAskill and David Milliken; Editing by Gareth Jones, Elizabeth Piper and Mark Potter)
