The chief of M&S has slammed the government’s suggestion of a price cap on food essentials as “preposterous” and said it should try to understand business better.
Stuart Machin was responding to reports the Treasury is considering asking supermarkets to freeze the price of essential items such as milk, eggs and bread in return for lifting regulations on packaging and healthy food.
It follows plans announced by the SNP for compulsory price caps in Scotland on up to 50 essential items, which first minister John Swinney defended yesterday.
Machin said the majority of products in the firing line were already voluntarily frozen in price and loss-makers for M&S.
“My first comment would be it’s completely preposterous,” Machin said. “I don’t think the government should be trying to run business. I think they should probably try and understand business better.
“If anything, there is so much in the government’s control. My advice to government is to reduce some of the tax and regulatory burden and free us up in a very competitive market.”
Machin said ONS figures this morning showing food inflation at 3% in the 12 months to April “demonstrates that food retailers are taking a big responsibility to try and minimise passing through prices”.
“And when you look at some of the margins on the products people are referring to, things like a pint of milk – for us it’s 85p and it’s been 85p for a couple of years. Although we protect the price we’re giving our farmers, we don’t make money on milk. It’s actually loss-making. I think it’s about negative 7% margin.
“We’ve held the price of bread at 75p to try and give everyday great value, and our bread is negative margin.
“We make small single-digit margin on things like eggs and some core grocery lines like sugar and flour.
“Bananas are another case in point. The last time I looked, bananas were minus 6% margin.”
Read more: ‘Crazy’ supermarket price capping plan came from No 10, say sources
Machin was commenting as he announced M&S’s full-year results to the end of March, showing group adjusted profit before tax fell by £210m to £671m, primarily due to the trading impact of the cyberattack last April on the clothing and home businesses.
Food sales grew by 7% and food market share increased to 4.1%, or 4.6% with online sales through Ocado included.
On inflation stemming from conflict in the Middle East, Machin said: “It’s very hard for us to really calculate what’s going to happen.” He said “the most important thing is the government does have some choices” if it wants to help retailers shield consumers from rising prices.
The conflict was among a “triple whammy of headwinds” faced by retailers, also including packaging taxes and added regulation in the Employment Rights Act and rules on products high in fat, sugar or salt (HFSS).
“You’ve got the extra packaging taxes, which was a choice,” Machin said. “We did ask the government to review that and reverse that decision.
“That tax on packaging for us was a one-off hit in April of £40m and it’s due to go up potentially by another £10m next year.”
He said changes in Employment Rights Act could have a “big impact” on recruitment, while the deposit return scheme would present retailers with a big bill for having “machines that break down every day” in stores.
The regulatory burden included “nutrition profiling, mandatory reporting of health sales, new targets and penalties if you don’t sell x amount of health products,” he said.
“An upcoming challenge for us is the deposit return scheme, something that’s been operating in Ireland that basically doesn’t work – the machines break down every day.” He said having the machines in every story would cost about £7m to £10m a year.
“The list can go on and on,” he said.
Writing in The Times yesterday, Chancellor Rachel Reeves said new measures to support households and businesses would be announced on Thursday. “The next phase of support will build on our work to cut energy bills, protect motorists and crack down on unfair profiteering,” she said. “Importantly, it will go further to support households in the months ahead who are looking for help at prices rise.”
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