Prime Minister Theresa May said that “Brexit means Brexit”. But what she wasn’t expecting was that Tesco would stop selling Unilever products, including the “very British Marmite” in a row over a price increase.
Marmite and Pot Noodle have been pulled from Tesco shelves in a price war sparked by the UK’s Brexit vote and a sliding pound. Tesco has refused to pass on its customers the price increase wanted by Unilever which includes brand such as Marmite, Persil, Pot Noodle, Knorr and PG Tips.
The row between the two companies might be funny, but it is a direct consequence of both the Brexit vote and a weak pound.
The weakness of the pound is having an impact on prices. A low cost pound is generating inflation and we could see the price of foods increase sharply if it continues to slide.
And many companies – particularly retailers – will finish their stocks in the next few weeks, which could mean that in the run-up to Christmas the British consumer will see price rises. The situation could be exacerbated in early 2017 if the fall of the pound continues.
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Exacerbated inflation could also have an impact on the Bank of England’s future decisions. An interest rate cut – which are already historically low- could now become more problematic as it would further depreciate the pound. So, the Governor of the Bank of England, Mark Carney, might have to hike the rate in early 2017 if the current trend continues, which in return will have an impact on the mortgage rates of millions of homeowners. And as the PM has said she will trigger Article 50 in March 2017 without knowing if Britain will be part of the common market or not, we can expect the markets to react badly and see inflation hit the price of foods, petrol etc.
For now, the most dramatic move in the financial world following the EU referendum result was the fall of the pound against the euro and the dollar.
Let’s be honest, in the short term, it has been good news for investors with exposure to companies with overseas earnings. But the recent movements of the pound have started to have a dramatic impact on the economy. And some rich people became richer due to the FTSE breaking a record high.
But in the long term, the damage to the economy could be real and it could badly hurt the poor.
Marmite: Brexit’s true victim?
Right now, the first victim of Brexit is Marmite. Unilever is alleged to have stopped deliveries to Tesco until the row is settled. It is also understood that Unilever has approached all big retailers with a price hike plan. Some have accused the company of using Brexit as an excuse to raise their prices even though the product is made in the UK. Of course, a big corporation like Unilever will always try to make more profit whenever they can.
And that’s where the problem is for the PM. The chaos Theresa May has created with her lack of planning over Brexit has now hit the supermarket shelves.
In July, Paul Polman, Chief Executive of Unilever, warned that companies could be forced to increase the price of products to offset the fall in the value of sterling against the dollar and euro. And what did the PM do about that? Well, Theresa “Mayhem” didn’t listen or even care.
It is a fact that anybody who is importing things from Europe, raw materials included, will be impacted by the falling pound. And the uncertainty surrounding access to the single market does not help either. At some point companies will have to reflect the chaos in their pricing, because they won’t accept falling profits just because the British economy is suffering and the PM didn’t bother to have a plan.
With the economy struggling in the wake of the Brexit vote, here comes another grim reality: low-paid workers will be the first real victim of a plummeting pound and a price hike.
Theresa May said that “Brexit means Brexit”, but what it will really mean for you will depend on your income.
As Jeremy Corbyn said at PMQs on Wednesday 12 October:
“The reality is since the Brexit vote the trade deficit is widening and the value of the pound is down by 16 per cent
May’s government has drawn up no plan for Brexit, has no strategy for negotiating Brexit and offers no clarity, no transparency and no chance of scrutiny of the process to develop a strategy”.
The jobs and income of millions of people are at risk and the government has no answer.