Brits believe supermarkets are making profit margins of 50%, a survey by the Institute of Economic Affairs has found, despite the true figure falling around 2% to 4%.
Consumers considered supermarkets as making among the highest profit margins of any sector, after only electricity and gas companies and water companies, and on a par with airlines and property developers. In reality, supermarkets make the lowest average profit margins of those sectors.
Brits “significantly overestimate” the profits of supermarkets, the survey of 3,001 British voters conducted in January found.
“Voters distrust big business and significantly overestimate profits, holding the belief that economic growth benefits corporations at the expense of consumers,” the IEA report – A Growth Mindset? – states.
“This gap between reality and understanding reinforces a broader narrative that large businesses are extracting excessive value from the economy, rather than operating within tight constraints,” the report notes.
“If voters believe businesses are already highly profitable, then the case for government creating the conditions for them to grow further becomes much harder to make.”
A clear majority of those surveyed by the IEA broadly supported “key pro-growth policies”, including cutting taxes (72%) and reducing regulatory barriers (61%).
Last month, supermarket bosses urged the government to light a “bonfire” of legislation to help the sector act to tackle the threat of soaring food prices.
CEOs from most of the major supermarkets – including Tesco boss Ken Murphy, Sainsbury’s CEO Simon Roberts and Morrisons chief Rami Baitiéh – met Chancellor Rachel Reeves and senior officials in Downing Street to discuss the response to the Iran war, and help in mitigating inflationary pressures.
Despite consumer sentiment, a 2023 investigation by the Competition & Markets Authority did “not find evidence that groceries inflation is being driven at an aggregate level by weak competition between retailers” and that food inflation was being driven by rising input costs.
“This should provide consumers with reassurance that effective competition is ensuring continued pressure on retailers to pass on cost savings to their customers,” the CMA said at the time.
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