Price Rises Should Be Justified, Not To Offset Falling Pound, Says Tesco Chief

Price Rises Should Be Justified, Not To Offset Falling Pound, Says Tesco Chief

Tesco's boss has taken aim at global suppliers for considering price increases in order to prop up profits in the wake of the pound's collapse.

It is the first time that chief executive David Lewis has spoken publicly since Tesco's spat with Unilever last month, when the supermarket reportedly refused to bow to a 10% wholesale price rise to offset a drop in sterling.

Tesco briefly withdrew cupboard staples including Marmite and PG Tips from shelves before Unilever announced that the dispute had been "successfully resolved".

Unilever had earlier warned that price hikes would be implemented to cover the cost of imported goods after sterling dropped nearly 20% against the dollar and 15% against the euro.

Mr Lewis - who worked at Unilever for 28 years - said price increases should be "justified" and not be made in an effort to prop up profits so that they look appealing to investors.

He said exchange rate volatility is normal in many markets.

"The only thing we would ask of companies that are in that position is they don't ask UK customers to pay inflated prices in order that their reporting currency is maintained. They don't do that for countries outside of the UK," the chief executive said.

Mr Lewis said multinational businesses are able to report earnings in a way which accounts for current and constant exchange rates, giving them an opportunity to strip out the effect of volatility in the value of sterling.

The Tesco boss made the comments while speaking to reporters at the supermarket's Welwyn Garden City headquarters in Hertfordshire on Thursday.

The effects of a weak pound are expected to start feeding through to consumer prices in the months ahead.

Bank of England governor Mark Carney warned Britons not to be fooled by last month's drop in inflation, which fell to 0.9% from 1% in September, according to figures released by the Office for National Statistics (ONS).

He said the official figures for October were down to very volatile clothing and footwear prices, with retailers having been hit by unseasonably warm weather.

In a hearing with MPs on the Treasury Select Committee, Mr Carney cautioned that "inflation is going up" as the plunging pound will put pressure on retailers and manufacturers to raise their prices.

ONS Producer Prices Index (PPI) showed that total input prices rose 12.2% in October, compared with a 7.3% jump in September, while the pound's weakness pushed output prices to 2.1% from 1.3% in September.

Former deputy prime minister Nick Clegg has also warned of further consumer price hikes if the UK pursues a so-called "hard Brexit".

In a speech delivered last month, he warned that shoppers would have to bear the knock-on costs of "whopping" tariffs on imported foods if the UK left the European single market, amounting to a 59% levy on beef, 38% on chocolate, 40% on New Zealand lamb and 14% on Chilean wine, which would be compounded by weaker sterling.

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