MPs report divides British food retailers

By Anita Awbi

- Last updated on GMT

Related tags: Retailing, Supermarket, Oft

UK food retailers have been split by the All Party Small Shops
Committee report calling for a new retail watchdog and a halt to
further mergers and acquisitions pending government guidelines.

The report published today, called High Street Britain: 2015, paints a bleak picture for the future of small independent food retailers struggling under conventional and anti-competitive supermarket strategies.

As a result the MP committee is calling for another retail regulator, free from the current Office of Fair Trading (OFT), and an end to the Jersey VAT loophole exploited by supermarkets bringing goods into the UK and avoiding import duty.

And recommendations have been made to government to overturn the 'two market ruling', which allows the OFT monopoly board to consider the convenience store and supermarket activities of the major four chains as separate.

But the British Retail Consortium (BRC) has hit back at the report. The director general Kevin Hawkins said: "We are disappointed that the committee has not grasped the realities of modern retailing, nor have they understood all the burdens small retailers face with regulation."

He claims proposals in the report are trying to turn the clock back 30 years and reverse some well established trends in consumer shopping habits.

"Consumers have clearly voted with their feet. Nevertheless there are still many thousands of independent specialist butchers, bakers and other food shops that are alive and well throughout the UK and most of them will still be around in 2015,"​ he said.

But the committee found that the UK has lost nearly 30,000 independent food, beverage and tobacco retailers over the past 10 years - a trend that will undoubtedly continue if the balance of power is not remedied.

Market leader Tesco refuted this claim. Planet Retail reported that the supermarket's corporate affairs director Lucy Neville-Rolfe said this morning: "I do not really share the All Party Group's view that small shops are in terminal decline. There are and will continue to be many thriving small shops that provide exactly what customers want. People use both supermarkets and small shops at different times and as the report acknowledges the retail market is fiercely competitive."

The report advises that a new autonomous body with far-reaching powers should take an active role in market regulation, as the OFT is principally bound to cover competition concerns rather than study the wider socio-economic impact of a decline in independent retailers.

The OFT has said it will consider the report.

However this proposition has divided many in the sector, with MPs pushing for the creation of the regulator and some small shops groups shying away from the prospect of more red tape.

A spokesperson from the Forum for Private Business (FPB) told FoodandDrinkEurope.com​: "Do we need another level of bureaucracy? The OFT is already there. It can do this if it takes more of a regulatory role. It needs to get its act together and bear its teeth and have the stomach for a fight. It hasn't done that yet."

But MPs hope the report's recommendations will help protect private business and put an end to anti-competition behaviour and aggressive price strategies pursued by the big four supermarket chains.

They identified several problems of increased food retail consolidation, including the development of out of town one-stop supercentres, the opening of branded convenience shops in local areas, and initiation of price wars intended to lure customers.

Evidence gathered from Proudfoot, a local supermarket in Withernsea, detailed how Tesco had opened a competing shop in the area. Tesco was failing to attract custom and started offering shoppers a 40 per cent discount, exerting extreme pressure on its independent rival.

This represents a pattern across England and Scotland, with supermarkets offering between 33-40 per cent discounts to consumers in an attempt to garner market share, the report claims.

All in all the report found only seven advantages of the current monopolisation effect - including improved supermarket and supplier logistics - against 24 disadvantages.

High Street Britain: 2015 took seven months to research, and covers the wider implications of the supermarket phenomenon on the UK's socio-political landscape.

Related topics: Markets

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