City comment: Supermarkets could soon find themselves in a cost-of-living storm

It is crass to talk of businesses having “a good pandemic” but supermarkets did.

Grocers enjoyed soaring sales as restaurants shut, though costs climbed too. Now costs are falling but spending remains above pre-pandemic levels. It looks like a permanent shift.

Supermarkets should be careful. The grocers could find themselves at the centre of a cost-of-living storm.

With April’s tax rises now confirmed and the energy price cap set to jump at the same time, household budgets will be squeezed to an extent they haven’t been in years. Every cost will be watched and supermarket bills will be closely scrutinized for potential savings.

If the supermarkets don’t give customers a helping hand, they could find themselves the subject of ire.

Retailers are already catching some flak. Food poverty campaigner Jack Monroe has accused the grocers of stealthily axing their cheapest ranges, forcing Britain’s poorest to buy pricier items. Newly private Asda and Morrisons have been accused of hiking prices at above market rates, claims they deny.

But prices are rising. Data from Kantar earlier this month suggests the cost of the average basket rose by £15 in December.

Retailers argue they are simply passing on rising costs, not making any extra profit. But shoppers can rightly shoot back: why should your profit margins be protected at the expense of our incomes?

The “Big Four” were forced to hand back Covid rates relief after public pressure in 2020. We could see similar anger if prices keep rising at a time when budgets are squeezed. Either that, or shoppers will simply go elsewhere. Price wars are already looming.

For supermarkets, the sweet spot them have found themselves may fast be coming to an end.