LONDON – Former Sainsbury’s CEO Justin King says UK shoppers are “completely in the dark” about what Brexit will mean for supermarkets.
King, who was in charge of Sainsbury’s for a decade until 2014, told BBC’s Panorama programme: “One can say very clearly what the direction will be: higher prices, less choice, and poorer quality, because all of those dimensions have been improved by these open trading relationships that we’ve had over the last 40 years.
“Brexit, almost in whatever version it is, will introduce friction, it will introduce barriers. That makes it less efficient, which means all three of those benefits – price, quality, and choice – go backwards.”
Inflation is rising rapidly after the fall in the value of the pound following last year’s Brexit vote. Food and drink prices across the UK are already rising and Sainsbury’s warned in March this year that “the impact of cost price pressures remains uncertain” – meaning that rising import costs could push prices higher.
King was well respected as boss of Sainsbury’s and credited with turning around the supermarket’s fortunes. He supported the Remain campaign during last year’s referendum on EU membership.
A report published by Grant Thornton on Monday and commissioned by the UK’s Food and Drink Federation warns that Brexit could be hugely disruptive to the industry. Almost four in 10 low-skilled workers in the UK food and drink sector are EU citizens, while 19% of high-skilled workers are from the EU.
Grant Thornton write in the report: “The EU Exit could, therefore, have significant implications for the sector. A number of companies noted that even if they were not directly affected, their supply chain could be negatively impacted.”
King’s successor, Mike Coupe, has tried to put a positive spin on Brexit’s impact on supermarkets. He told a conference in March: “If we see customers’ incomes being squeezed – and we are beginning to see a slowdown in that disposable income growth – supermarkets tend to do better, because people stop eating out and start eating in.”
But he added: “I’m not saying I would ask for it because broadly speaking it’s not good for the economy more widely.”
King told BBC’s Panorama: “The last thing you’re going to see any service retail chief exec say is: ‘We are going to put up prices.’ The intention of supermarkets is to drive price down, quality up, and therefore deliver value for money. That was there ambition the day before the Brexit vote and will remain after it. Brexit just made it a whole lot harder in my estimation.”
Some manufacturers have begun to combat rising prices by making products smaller, a trend dubbed “shrinkflation.” Doritos, Peperami, Coco Pops, Toblerone, Hula Hoops, and Malteasers have all recently shrunk in size, while still selling for the same price.
BBC Panorama’s “Britain’s Food & Farming: The Brexit Effect” will be on BBC1 on Monday July 10 at 8.30 p.m. BST (3.30 p.m. ET).