ALEX BRUMMER: Supermarket price gouging is fuelling runaway inflation

Britain’s big supermarkets protested their innocence when called before a Commons select committee last week to defend profits.

The explanation offered was that margins on grocery sales are narrow and under pressure, in contrast to the handsome returns of the big branded goods suppliers.

What they failed to say was that Asda and Morrisons, both of which sit on debt piles that came with private equity ownership, decided to target higher margins for fuel. 

The Competition and Markets Authority (CMA) found that, at Asda, the target fuel margin tripled between 2019 (pre-Covid and the war in Ukraine) and 2023. It doubled at Morrisons.

Both Tesco and Sainsbury’s followed suit by increasing prices rather than pumping at a discount.

Price gouging: Research by the International Monetary Fund found that swelling goods prices, caused by widening profit margins, are a big contributor to inflation

Competition regulator, the CMA, is now looking at potential kinks in the food supply chain, where consumers are facing prices that have soared 18.4 per cent in the last year. 

The price gouging which is taking place on supermarket forecourts – usually the cheapest place to buy petrol and diesel – matches a narrative from the International Monetary Fund. 

It has found that swelling goods prices, caused by widening profit margins, are a big contributor to the great inflation. The mystery of food prices is illustrated by Britain’s milk market.

Official data shows milk, cheese and egg prices climbed by an extraordinary 27.4 per cent year-on-year in May (down from 29.3 per cent) the previous month. 

Yet an investigation by the FT found that Britain’s two overseas-owned milk processor, Scandinavia’s Arla and Germany’s Muller, have cut ‘farmgate prices’ – the money received by dairy farmers – five months in succession. 

That placed unnecessary pressure on British milk producers, many of them smaller farmers.

What we don’t know is who pocketed the gains as farmers and end consumers suffer.

It doesn’t help much that successive governments allowed the nation’s dairy supplies to be controlled by large overseas combines removed from the cut and thrust of the UK’s battle with surging prices.

The Bank of England aims to end the inflationary spiral by suppressing demand through higher interest rates.

If it had asked the CMA to look at food prices at an earlier date, homeowners and, indirectly, renters would not be suffering the impact of penal mortgage costs.

Worldpay return

Remember Worldpay? Created by serial entrepreneur Ron Kalifa at the Royal Bank of Scotland, it was sold to private equity group Advent for £2.5billion in 2010. 

It was then floated in London by BT chief executive Philip Jansen for £6billion five years later.

Two years on, it was scooped up by US payments rival Vantiv for £8.4billion and, in 2019, was valued at £35.8billion when sold to Florida-based Fidelity National Information Services (FIS) for £35.8billion. 

It was effectively the UK’s biggest tech creation, other than chip designer Arm Holdings, and a trailblazer for Britain’s fintech revolution.

Fidelity National overstretched itself and Worldpay lost momentum under its fourth ownership structure in 13 years. It is now reported to be back in play with a more realistic valuation of £11.8billion. 

Advent, which polished up Worldpay after it escaped RBS, is thought to be among the likely buyers. Advent is not the most popular private equity outfit in the UK following the purchase of aviation pioneer Cobham, which it dismantled and sold in record time with little regard to Britain’s aerospace ambitions.

Retaking control of Worldpay might be an opportunity for redemption. The City may not be flavour of the month for initial public offerings, but it is highly regarded for its fintech innovation. There could be no better location for an eventual return of Worldpay to public markets.

Brighton rocks

Britain’s Victorian era beach resorts are often desolate places, doomed with extreme poverty, as my former colleague Madeleine Bunting graphically records in her new book The Seaside: England’s Love Affair.

She even found great disparities of income in the resort of my birth, Brighton, where we both attended the same grammar school-turned-sixth-form-college.

So what a thrill to find a study by law firm Irwin Mitchell and economic forecaster CEBR, which finds that outside of London, the city of Brighton is the country’s most appealing destination for foreign investment with ‘its rapidly expanding economy’ and ‘exceptional talent pool’.

Quite an uplift from the seedy portrayal by literary masters Graham Greene and Patrick Hamilton.

This post first appeared on Dailymail.co.uk