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Consumers warned of 5% price hikes

Pound and graph shutterstock_223021513 725 x 500

Consumers are being warned of price hikes of at least 5% on many items after Christmas, as retailers react to the falling value of the pound, which fell by 16% on Friday.

David Sables, a consultant for Sentinel who advises retail suppliers on supermarket negotiations, told the Mail on Sunday that suppliers were going to have to demand higher prices in order to survive. The head of a leading fashion retailer is understood to have said that he was 'already seeing suppliers asking for price rises of 10%'.

Sables said: "This is something consumers need to get used to.

"Suppliers operating in dollars or euros have had a 15 per cent rise in their costs as a result of the referendum and more recently because of the lack of any plan following that. This is a major issue and it is coming to your shelves soon."

A KPMG spokesperson, Andrew Underwood, said ‘thousands’ of price hikes were on the cards and the increases could be as high as 8% on certain products, adding: "The price moves we have seen so far are the tip of the iceberg.  Some suppliers might go bust if they don’t show resolve.” 

Lord Wolfson, CEO of Next, recently announced that Next was expecting to have to implement price increases of around 5%, and confirmed that need in the company's half-year trading update.

Last week saw a public spat between Tesco and Unilever, with Tesco de-listing all of the supplier's brands on its online store after Unilver tried to impose price hikes of around 10%. This was allegedly to maintain stock in stores, although it was also suggested that it was a clever way of bringing the matter to the attention of the public. 

Retail executives have indicated that the declining pound could lead to an average price hike of 7.5%, with around 5% passed on to consumers.  Based on an annual £300bn retail spend, David Sables of Sentinel estimates the impact to be around £15bn.

Source : Insight DIY

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17 October 2016

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