The report was commissioned by Defra to look into allegations that supermarkets were abusing their buying power to drive down the prices paid to farmers and making fat profits on the prices charged to customers.
London Economics, one of Europe’s leading economics consultants, carried out research into 61 different farm product categories across nine EU member states covering a timespan from 1985 to 2003, looking at the spread between farmgate and retail prices.
In its summary it concluded: “A comparison of the level in 2001 of the various farmgate retail price spreads shows that in all but two cases, the UK spreads are among the lowest of the EU member states in our sample.” The report also investigates the ‘concentration’ (market dominance) of retailers across Europe and again finds that the top five retailers in the UK have a much lower aggregate share of the overall food market than in many other states. “Out of the 15 states that made up the EU before May 1, only Greece and Italy had a lower concentration level,” it concluded.
The growth in market share of the top five in the UK in the period 1993 to 2000 was 7.7% compared with an average increase across the EU of 21.7% between 1993 and 2003.
BRC director general Kevin Hawkins said: “The London Economics report proves what we have always known, that falls in farmgate price are passed on to consumers at retail level just as quickly as increases in farm prices. The report also shows that there is no significant relationship between the strength of the UK supermarket sector and the difference between prices paid to farmers and the price consumers pay.”
And in a reference to PM Tony Blair’s claim during the 2001 election campaign that supermarkets had farmers in an armlock, he added: “This research provides the evidence that explodes the myth once and for all that supermarkets have farmers in an armlock.”
Author of the report Patrice Muller agreed that supermarkets were not using their buying power to profiteer.
However, he pointed out that his brief was solely to investigate spreads and not whether the prices farmers were receiving were fair.
Terry Jones, head of the NFU’s food chain unit, said: “We are not pointing the finger at retailers, but some chains do not deliver decent value to farmers.”
A Defra spokesman said the report would be discussed by stakeholders, including the BRC and the NFU, at a seminar later in the year.