The oil majors estimated that Peak Oil happened in 2008 and after that, year-on-year, the demand for fuel in the UK has declined and will continue to do so. On the other hand, the cost of doing business has certainly not declined. Minimum wage in 2008 was £5.80 and now it’s £10.40, energy bills have quadrupled, insurance has increased, business rates have climbed and interest rates continue to increase with speed. In short, 70% of the costs of doing business have doubled since 2008, so what the hell is the Competition & Markets Authority (CMA) talking about?
The CMA has been asleep at the wheel and poorly advised a government guilty of the same incompetence. Who’d have thought that the purchase of two national supermarkets by American PE funds would affect competition?! These PE funds are funded by the same UK banks that are increasing the cost of borrowing and will be quick to turn the screw if you can’t meet your obligations. The CMA is now using the investigation into inflation in grocery products to highlight concerns regarding increased fuel margins, as if they didn’t know! I think the CMA should be hauled across the coals for incompetence but the supermarkets should hold their ground and reject this level of interference while highlighting the increased cost of business. After all, many supermarkets are also fighting for survival.
While costs have increased, sales have stagnated so margins have to rise. According to Kantar, the independent retail sector at +3% has been the least effective in passing on wholesaler increases while Tesco is leading the pack at +17%. This suggests that if you are lucky enough to be +10% like-for-like, you’re probably just standing still. To make matters worse, we have record levels of drive-offs and many retailers are suffering a rise in shoplifting. It’s simple: we can’t go back to 2008 and 4.5ppl.
If the CMA uses media announcements to shame the supermarkets into reducing fuel margins, traditional forecourts will start to disappear faster than this government planned, and maybe they’ll be joined by a supermarket. Over the coming decade volumes will continue to decline so the battle to protect a fair margin needs to happen now.