Tesco CEO: Ex-Sainsbury boss is wrong on Brexit -- but 'no deal' could push up food prices

  • Ex-Sainsbury’s CEO Justin King said Brexit will lead to “higher prices, less choice, and poorer quality” at supermarkets.
  • Tesco CEO Dave Lewis says EU exit won’t affect choice or quality but says prices are being squeezed.
  • Lewis says: “A no deal scenario, if there were to be tariffs, then actually that could impact the price of food.”

LONDON — The CEO of Tesco says the former head of rival Sainsbury’s is wrong to suggest Brexit will lead to “higher prices, less choice, and poorer quality” at supermarkets.

However, Tesco boss Dave Lewis admitted that the Brexit-driven collapse in the pound is pushing up prices and warned that failure to secure a deal with the EU by the March 2019 Brexit deadline could lead to higher food prices across the UK.

Justin King, who was in charge of Sainsbury’s for a decade until 2014, told BBC’s Panorama in July that shoppers are “completely in the dark” about what Brexit will mean for supermarkets.

King said: “One can say very clearly what the direction will be: higher prices, less choice, and poorer quality because all of those dimensions have been improved by these open trading relationships that we’ve had over the last 40 years.”

Asked at a press conference on Wednesday if he agreed, Tesco CEO Lewis told Business Insider simply: “No.”

Prompted for more, Lewis said: “I know Justin very well and I appreciated his comment.

“The point about higher prices, I think he has a point. Currency changes — we’ve seen inflation coming from a 10% move versus the dollar and a 15% move versus the euro. We’ve had three years of deflation, we’ve now got some inflation in the market. Are prices higher? Yes, they are.”

Inflation is currently running at 2.9%, its joint-highest level since the vote to leave the European Union last year.

But Lewis said: “I don’t believe it will lead to less choice and poorer quality — we won’t let it do that. At the moment, as a UK retailer, we have a much deeper and richer supply chain than all our competitive set. We don’t see any reason why currency changes should change that. What we have to do is try and find ways of mitigating and offsetting some of the costs from currency to try and maintain that, and that’s what we’ve been doing.

“It won’t be that we suddenly say because of any political changes the range is going to be less or we’ll accept a lower quality — we won’t do that.”

Lewis was speaking at a press conference following the release of Tesco’s half-year results, which showed sales up by 3.3% and operating profit up 27.4%. Prices rose in the period but Lewis was quick to point out that price rises were around 1% lower than competitors.

‘We’ve been very clear with the civil service and policymakers’

However, while Lewis disagreed with King’s assessment of Brexit, he admitted that price rises could get worse if Britain fails to reach a deal with the EU on trading terms before the March 2019 leaving deadline.

“In a no deal scenario, if there were to be tariffs, then actually that could impact the price of food,” Lewis said. “That’s clear, everybody knows that, we’ve been very clear and we’ve shared with the civil service and policymakers how that actually works.”

Prime Minister Theresa May admitted last weekend that Britain could end up with no deal with the EU at the end of negotiations but has said her government is preparing for the possibility.

Three leading UK food academics warned in August that warns Brexit could disrupt supply and prices for food in the UK on a scale “unprecedented for an advanced economy outside of wartime” and the British Retail Consortium has warned of possible shortages on shelves unless the government does more to prepare for post-Brexit trade with the EU.

Lewis also echoed concerns about a possible shortage of EU labour needed to pick crops in England. The Food and Drink Federation warned earlier this year that 36% of its members said they would be unable to adapt if they did not have access to EU labour after Brexit.

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