Former Sainsbury’s boss warns of imminent price hikes
The ex-boss of one of the UK's leading supermarkets has warned shops will have to start hiking prices soon in response to the plunging pound.
Justin King, who spent a decade as chief executive of Sainsbury's, told a conference on Wednesday it would be impossible for shops to absorb the higher costs of raw materials and imported products without charging customers more.
Chairman of BT Mike Rake also said the costs of mobile phone handsets were likely to jump.
Read more: Blame Number 10 for the fall in the pound
According to The Guardian, King said: "Retailers' margins are already squeezed. So there is no room to absorb input price pressures, and costs will need to be passed on.
"But no one wants to be the first to break cover. No business wants to be the first to blame Brexit for a rise in prices. But once someone does, there will be a flood of companies because they will all be suffering."
Bank of England rate-setter Michael Saunders said yesterday the fall in the value of the pound, which has lost more than 15 per cent on a trade-weighted basis since the referendum, had added at least 12 per cent to the cost of imported goods.
KPMG's head of macroeconomics Yael Selfin also told City PM recently that the consultants were already fielding questions and concerns from clients over how they could manage rising costs, and how much they should pass on to consumers.
Although inflation on the consumer prices index (CPI) – which measures price rises across the basket of goods which represents shoppers' spending – has remained relatively low at 0.6 per cent, it has been a different story for businesses, who are already feeling the effects of the weaker pound.
Read more: Sterling dropped to its lowest ever level last night
The producer prices index (PPI), which tracks costs to businesses, registered price rises of 7.6 per cent in the year to September – the fastest rate of increases since 2011.
Inflation is also set to jump as a result of climbing oil prices. In sterling terms, a barrel of crude oil has jumped by almost two-thirds since its nadir in early February.
Rake, head of BT, also said today that the telecoms giant had been hit with a 10 per cent jump in the cost of "mobile phone handsets and home hubs."
He warned: "That will need to be passed on at some point."
The Bank of England is forecasting inflation will rise to at least 2.1 per cent by the middle of next year, although sterling has fallen further than it expected, raising the prospect of a faster climb in prices.
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