Shops Warn Food Prices Will Continue to Rise.
A retail lobby group has expressed that there is "little hope" for food prices to "decrease" in the latter half of 2025, following the changes outlined in the Budget. The British Retail Consortium (BRC) indicated that the increased costs associated with higher wages and adjustments to National Insurance tax, effective in April, will ultimately be transferred to consumers.
The BRC projected that food price inflation is expected to escalate from 1.8% last month to 4.2% in the second half of this year, with continued price increases anticipated for items such as vegetable oil, orange juice, butter, and coffee. Furthermore, it noted that overall shop prices, which have recently been on a decline, are likely to begin rising again.
In contrast, the Treasury stated that the independent Office for Budget Responsibility has predicted that food inflation will remain below 2.2% for this year.
Chancellor Rachel Reeves has previously said "the right thing to do was to ask businesses and the wealthiest in our country to pay a bit more".
In her October Budget, Reeves announced that the National Living Wage for individuals aged 21 and over would rise from £11.44 to £12.21 per hour starting in April, while employers' National Insurance contributions would increase from 13.8% to 15%.
Retailers responded in November, cautioning that the combination of elevated wages and taxes would render job reductions "inevitable," potentially resulting in price hikes and store closures.
In a Christmas trading update released on Thursday, Marks & Spencer (M&S) characterized the economic outlook regarding growth, inflation, and interest rates as "uncertain," noting that it is "facing higher costs due to well-documented tax increases."
Nevertheless, M&S reported a successful Christmas season, with like-for-like food sales rising by 8.9%, and sales in clothing, home, and beauty categories increasing by 1.9%.
Like-for-like sales exclude revenue generated from newly opened stores during the reporting period.
For the 13 weeks ending on 28 December, overall sales rose by 5.6%.
Other retailers also shared their trading updates for the holiday season, including Tesco, which reported a 4.1% increase in UK sales for the six weeks ending on 4 January, with food sales climbing by 4.7%. The company anticipates full-year operating profits to reach £2.9 billion.
On Thursday, Helen Dickinson, the chief executive of BRC, stated that the organization's modeling, in conjunction with forecasts from 52 chief financial officers, has resulted in a projection of significantly increased food price inflation for the latter part of the year.
"As retailers battle the £7bn of increased costs in 2025 from the Budget, including higher employer National Insurance, National Living Wage, and new packaging levies, there is little hope of prices going anywhere but up," she said.
However, the Treasury said food inflation had "fallen from a peak of 19.6% under the previous government to just 1.9%".
It said that the Labour government was "now focused on putting more money in people's pockets by growing the economy".
A representative stated that the organization is assisting retailers by reforming business rates.
The lobby group reported that food price inflation in December stood at 1.8%, marking its lowest level since November 2021.
The British Retail Consortium (BRC) employs a distinct basket of goods to assess inflation, differing from the official statistics provided by the Office for National Statistics; however, the results are generally comparable.
In the lead-up to Christmas, there was an overall decline in shop prices, attributed primarily to deflation in non-food items, according to the BRC.
The rate of price increases for fresh produce, including fruits and vegetables, rose by 1.2%, while inflation for pantry staples reached 2.8%.
Retailers have expressed concerns regarding potential price hikes as a result of the measures outlined in the Budget.
This week, Next announced plans to increase prices on certain clothing items starting in April to counterbalance an "unusually high" £73 million rise in staff wages and taxes.
Next projected a price increase of 1% over the course of a year, which remains below the current inflation rate. UK inflation reached 2.6% in the twelve months leading up to November, the highest rate observed in eight months.
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Despite rising food prices and increased operational costs, the retail sector has demonstrated resilience, with companies like Marks & Spencer and Tesco reporting strong sales growth. Retailers are adapting to the changing economic landscape by finding ways to manage the impact of higher wages and taxes.
Innovations, strategic price adjustments, and successful holiday seasons suggest that businesses are positioning themselves to weather these challenges. With ongoing support from the Treasury and the potential for further economic growth, the future of the retail market remains hopeful, and consumers may see more affordable options in the long term.
Arla Milk Boycotts: The Controversy Behind Bovaer.
Arla Foods has asserted that the Boevar cattle food supplement will not enter the human food supply, despite claims from conspiracy theorists targeting the farmer-owned cooperative.
A recent initiative to incorporate a methane-reducing additive into cattle feed has led online consumers to threaten a boycott of three prominent supermarket chains.
Arla Foods revealed the trial of this supplement last Tuesday, aiming to mitigate the emissions generated by cows within their production processes.
The feed additive, referred to as Bovaer, will be tested on 30 farms across the United Kingdom, as announced by the company in a post on X last week, which has garnered nearly six million views. Arla describes this initiative as a significant opportunity to lower emissions on farms.
As the largest farmer-owned dairy cooperative in the UK, Arla is collaborating with Aldi, Morrisons, and Tesco for this trial.
The announcement has garnered 13,000 responses on X, prompting numerous individuals to dispose of milk in toilets and discard tubs of Lurpak, asserting that Bovaer is harmful and poses risks to cows, farmers, and consumers alike.
Why is Bovaer being tested and what is it?
Arla has indicated that the use of Bovaer could lead to a reduction in methane emissions from cattle by as much as 27 percent.
A report published by the UK government in 2022 identified the reduction of methane emissions as one of the most rapid and cost-effective strategies to limit the increase in global temperatures to 1.5°C. Methane is responsible for roughly 13 percent of the net greenhouse gas emissions in the UK.
In 2021, the most recent year for which data is publicly accessible, agriculture was responsible for 49 percent of methane emissions in the UK, as reported by the Department for Environment, Food & Rural Affairs (Defra).
The manufacturer of the supplement, DSM-Firmenich, explains that Bovaer inhibits the enzyme in the cow’s rumen that facilitates the conversion of hydrogen and carbon dioxide into methane. Consequently, this results in a lower release of methane into the atmosphere by the cow.
The company's website asserts that Bovaer has been "proven safe for animal, farmer, and consumer." In addressing online criticism in the UK, the firm cites 150 trials conducted globally and 85 articles published in peer-reviewed journals that support its effectiveness.
What has caused the backlash?
Arla's online statement incited significant outrage, especially among climate change skeptics and conspiracy enthusiasts, as the product was inaccurately associated with software magnate Bill Gates.
A comment on the post on X, which received over 14,000 likes, stated: “You are f****** insane if you think adding toxic chemicals to cows food that could cause harm to the farmers and the cows will help alter the climate of the planet I will be avoiding ALL of your products.”
“Cows have been farting since cows existed, and the climate has always changed,” one consumer wrote.
Another stated that the company is making a “huge mistake”, adding: “Once word gets around people will avoid your products. We do not want that poison in our food. Change your plans or go bankrupt.”
A fourth wrote: “I used to regularly buy your products (mostly protein shakes and yoghurts), but won’t be any longer until you stop using Bovaer. I will also be boycotting Tesco, Morrisons and Aldi while they continue to play a part in this. Anyone with me?”
Calls for boycotts against Tesco, Morrisons, and Aldi have garnered considerable attention, with many individuals also utilizing TikTok to encourage participation in the boycott. Viral videos circulating online depict individuals disposing of milk in toilets and sinks as a protest against consuming products produced by Arla.
DSM Firmenich was compelled to clarify that Bill Gates, who has been the focus of various conspiracy theories, has no association with the company. The firm stated, “Bill Gates is not involved in the development of Bovaer.”
Is Bovaer Safe?
DSM-Firmenich has announced that the UK Food Standards Agency has granted approval for the use of Boevar, citing "evidence that it does not harm the animals or negatively impact their health, productivity, or the quality of milk." The agency concluded that the product is safe for both animals and humans, and it effectively reduces methane emissions.
When used as directed, Boevar is "fully metabolized" by the cow, ensuring that it is "not present in milk or meat, thus eliminating any consumer exposure."
The company further states that there are no health risks associated with the substance, and it does not affect milk production or reproductive capabilities.
Arla Foods reaffirmed these assertions in a statement released to address the criticism. The statement further included: ”Alongside the 2,000 farmers across the UK who own Arla, we work hard to produce healthy & quality food every day. We work to ensure that this is done safely, whilst also working to reduce our impact on the environment.”
The chair of the National Farmers’ Union Dairy Board, Paul Tompkins, expressed that uncertainties persist regarding the "long-term efficacy" of Boevar and its effective application on farms. “This latest trial, on a product which has already been approved by the Food Standards Agency as safe for consumers, could help provide some of this evidence,” he added.
The rollout of Bovaer has sparked significant controversy, raising questions about its long-term implications for animal welfare, environmental efficacy, and consumer safety. Despite assurances from Arla Foods and DSM-Firmenich, skepticism remains, fueled by concerns over the additive’s potential effects on cows and distrust of corporate motivations.
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Public backlash, including boycotts and misinformation campaigns, underscores the challenges of gaining widespread acceptance for such initiatives. While the goal of reducing methane emissions is commendable, the controversy highlights the need for greater transparency, comprehensive long-term studies, and open dialogue to address public concerns and ensure that sustainability efforts are genuinely beneficial and inclusive.
According to Simon Hill, Head of Legal & Compliance at Certes Networks, this is mostly due to the fact that financial institutions are not only heavily regulated by data privacy requirements, but they are also under mounting pressure to be open to consumers and businesses about how they are protecting their data from potential breaches.
Additionally, no bank or financial services organisation wants to face the consequences of a data breach. This is demonstrated by the fallout of numerous data breaches in the industry over the years - from Capital One in 2019, to Equifax in 2016 and Tesco Bank in 2017. In the case of the Capital One data breach, a hacker was able to gain access to 100 million Capital One credit card applications and accounts. This included 140,000 Social Security numbers, 1 million Canadian Social Insurance numbers and 80,000 bank account numbers. Additionally, an undisclosed number of people's names, addresses, credit scores, credit limits, balances and other information dating back to 2015 was involved, according to the bank and the US Department of Justice.
What’s more, the damages of these data breaches are not only reputational, but also financial. As a result of Equifax’s data breach, the organisation reached an agreement to pay at least $575 million and up to $700 million to compensate those whose personal data was exposed. In 2016 Tesco Bank was fined £16.4 million by the Financial Conduct Authority (FCA) over its "largely avoidable" cyber-attack that saw criminals steal over £2 million from 34 accounts. This clearly shows that these consequences can arise no matter how ‘large’ or ‘small’ a data breach may seem; companies that do not encrypt their data adequately enough to safeguard it will be penalised.
On top of this, the increasing expectations of consumers means that banks and financial institutions are trying to achieve a balancing act: how can they protect data privacy, while at the same time remaining transparent about how data is being protected? However, it doesn’t have to be a trade-off between meeting customer expectations and meeting cyber security compliance requirements. Banks and financial services organisations can utilise technology to the fullest extent while still protecting data and avoiding the unthinkable repercussions of a data breach.
The balancing act
To achieve this balance, banks and financial services organisations need to take greater measures to control their security posture and assume the entire network is vulnerable to the possibility of a cyber-attack. Robust encryption and controlled security policies should be a central part of an organisation’s cyber security strategy. When stringent policies are generated and deployed, it enables greater insight into applications communicating in and across the networks. New tools are now available to enforce these policies, not only impacting the application’s workload and behaviour, but the overall success of the system access.
Conclusion
Banks and financial services organisations should not have to worry about keeping data secure and protected when it is entirely possible to do so. Adopting new ways to look at how organisations define policies through micro-segmentation and separating workloads by regulations, is one example of how to keep data more secure. Also, ensuring policies define only those users who have a critical need to see the data limits network vulnerabilities. And lastly, a robust key management system that is automated whereby keys are rotated frequently, can also help to safeguard system access and strengthen the organisation’s security posture.
This week we learnt that two of the UK’s top supermarkets are merging, shaking up grocery shopping for generations to come. The £13 Billion merger between Walmart-owned Asda and Sainsbury’s, which recently bought out Nectar, is set to create a grocery powerhouse that can finally compete against Tesco Stores.
Following the announcement shares rocketed and the public was happy to hear prices would receive a 10% cut as a consequence of the merger. Rpeorts indicate no jobs will be cut, nor will any stores be closed. So what is this merger all about?
Finance Monthly spoke to Dr Naaguesh Appadu, Research Fellow at Cass Business School and member of the Mergers & Acquisitions Research Centre, who comments on Sainsbury's and Asda agreeing to £13bn merger.
Dr Naaguesh Appad said: “This deal is about market share. Neither Sainsbury’s nor Asda can afford to stay quiet. You just have to look at the grocery sector right now: Tesco has acquired Booker and Morrisons supplies products to Amazon. Therefore, it is key to show the leadership in terms of groceries for the Sainsbury’s/Asda merger to happen. It should be noted that they neither company can grow organically, and they don’t have the option of staying away Tesco, from the current market leader.
“This deal with see the consumer win two-fold. First, customers will be able to access more products and second, they’ll enjoy lower prices (execs have stated 10%) on common products due to competition on suppliers. It will be interesting to see how this plays out in terms of competition, now that executives have stated there are no plans to close Sainsbury's or Asda stores.”
This week Tesco finally agreed to a £129 million fine for overstating its profits in 2014, thus avoiding prosecution. This agreement, made by Tesco Stores Ltd. Follows a two-year probe from the SFO. Not only did Tesco suffer majorly from share price hits, but is now also facing a huge fine for its errors. Alex Ktorides, Head of Ethics and Risk Management at Gordon Dadds LLP, here provides Finance Monthly with a specialist overview of the matter, and hints at potential implications for any business missing the mark when it comes to such critical internal vulnerabilities.
Tesco appears this week to have reached a key stage in the financial misstatement scandal that so badly hit its share price and reputation in 2014.
A brief recap. The retailer, in or about September 2014, shocked the financial world when it admitted that it had identified an apparent £250 million overstatement of its profits. The central problem was that it was alleged that Tesco had significantly overstated its profits by supposedly booking rebates (receipts) from suppliers that it had not yet received. A range of regulators became involved as the Tesco share price took a serious hit in the wake of the revelations.
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Misstating profits, as in the Tesco case, can give rise to a number of concurrent investigations in the UK, all involving different investigating and prosecuting authorities with differently sized sticks with which to beat the offending corporate entity and singled out individuals.
First in the firing line (though there is no magical order in reality) are the internal financial directors and external auditors who will likely face serious scrutiny from the Financial Reporting Council (FRC), which has in the past brought investigations in relation to past scandals such as Torex, Cattles and car manufacturer, Rover.
The FRC has a range of powers including fines and sanctions against individuals and the auditing firms. This will not be a cheap case to defend (FRC investigators invariably outsource forensic accounting investigatory aspects, the costs of which it will seek to recoup) and which may or may not be covered by the terms of professional indemnity insurance depending on the programme carried by the auditor in question.
Secondly will be the SFO investigation. The SFO will not be shy in seeking information and this will include amongst other things extensive disclosure of documents, countless recorded meetings and a range of witness statements and experts’ reports. Not a short process, nor one which is stress free.
The FCA will also be interested in protecting the public. In the instance of alleged misstatement of profits, as in the Tesco case, the ‘public’ are the investors and shareholders buying shares in a listed entity in a major regulated market such as the FTSE 100.
Similar to the ‘soft dollar’ settlements propounded by the SEC in the US, the FCA will look to quickly assess the period during which the share price may have been artificially inflated (or indeed in some cases, deflated) and look to impose or agree a settlement scheme as swiftly as possible. There is precedent to this, as well as the Tesco scheme announced very recently. In the mid-2000’s the FSA (now FCA) put huge pressure on the IFA sector to agree with Aberdeen Asset Management and others a financial compensation scheme for individual investors miss-sold so-called ‘split-cap’ investment trusts. This was no easy feat for the then Chief of the FSA John Tiner who was (anecdotally) personally calling up the professional indemnity insurers of those advisors involved in a bid to speed up the implementation of the compensation scheme. One imagines that Tesco and its management/insurers will be receiving similar pressure to agree the £85m scheme it has just announced.
Tesco’s Deferred Prosecution Agreement (DPA) – if it is sanctioned in the Southwark Crown Court next week – will be the fourth reached by the SFO. All of the DPAs reached so far have involved very different allegations and conduct (see Rolls Royce for example). The allegations involving Tesco relate to relatively short periods of time and very specific behaviour of alleged accounting errors involving the early booking of receipts from suppliers.
There is one common feature to the DPAs reached so far, and that is that each of the corporates under investigation that have successfully reached DPAs with the SFO have been seen to be cooperating with the investigation. That does appear to be a crucial aspect of the potential for reaching a DPA with the SFO.
So, what to do if an investigation occurs? The first thing is to obtain advice speedily. It may be necessary for legal advice to be obtained by different advisors and professional firms, with individuals quite often having to be separately advised to the corporate entities. A DPA may be the obvious and best solution and these are always predicated on cooperation. Very often in the case of enforcement proceedings or criminal investigations, cooperation is a vital component of reaching agreement and this is only increased significantly with the advent of DPAs. Indeed, in a recent speech, the director of the SFO stated that DPAs are not the ‘new normal’ but rather will only be available where there has been significant cooperation which is meaningful evidence by the corporation in question.
Cooperation can take many forms including but not limited to, the provision of documents (this sounds simple but often in reality these are frequently requested in huge volumes and under tight timescales and in a format that the SFO’s computing experts can easily handle). In the Polly Peck case, revisited on the return of Asil Nadir after some 19 years in the sun of Northern Cyprus, the SFO had recourse to review thousands of documents which were in some cases 20 years old and it was fortunate indeed that they had been retained at all.
DPAs can lead to a swifter conclusion of investigations (which are of course very damaging) and discounts on any penalties. Also, receiving reduced sentencing for those cooperating with the prosecutors may be on the table.
In summary, financial accounting methods and over or understating profit is a business critical issue. The implications – financial penalty, share price collapse, civil compensation schemes, expensive regulatory and criminal investigations, loss of income and in some cases, prison – are as serious as it gets in the corporate world. As Tesco has shown us (and a glance at current cases with both the SFO and FCA shows us that there are many more to come, not least of all such big brands as Barclays, Airbus Group and GlaxoSmithKline) misstating profits is a short term boost towards long term pain. The settlements with the FCA and SFO as a special offer that Tesco will not be looking to repeat.
TalkTalk has acquired the blinkbox Movies business and the Tesco broadband and fixed line voice base from Tesco Plc. The assets have been acquired free of debt and as a single transaction for cash. The announcement comes one day after the beleaguered supermarket revealed plans to close 43 stores and close its staff pension scheme.
On-demand provider of pay content in the UK, blinkbox works across multiple platforms and devices – both inside and outside the home. Its product offering dovetails with that of TalkTalk’s TV platform, which services 1.2 million customers in the UK.
As part of the deal, Adrian Letts, blinkbox CEO and co-founder will join TalkTalk as Managing Director for TV, reporting to Tristia Harrison, Managing Director of TalkTalk’s consumer business.
As part of the same transaction TalkTalk has also acquired Tesco’s broadband and voice base (75,000 broadband and 20,000 voice households). As with the recent acquisition of the Virgin Media National base, customers will be transferred across to the TalkTalk network over the coming months.
“Since launch, TalkTalk TV has demonstrated its popularity with value-seeking customers to become the UK’s fastest growing TV service. We are excited about the opportunity that blinkbox’s platform and technology expertise bring, and which will significantly accelerate the development of our TV platform. The purchase of Tesco’s broadband base is another example of TalkTalk leveraging its national network to grow faster. We are excited about the future of quad-play – fixed phone and broadband, TV and mobile – and this acquisition will help to further drive home our value for money advantage,” said Dido Harding, Chief Executive of TalkTalk.
