Morrisons family box

David Potts, chief executive of UK retailer Morrisons, has warned that supermarket prices will rise if the UK government fails to negotiate a tariff-free Brexit deal with Europe, according to a report in the Guardian.

The warning comes at a time when the UK’s economy and many families are struggling from the impact of Covid-19, and follows prime minister Boris Johnson’s suggestion this week that he might be ready to tear up his own Brexit withdrawal agreement.

“From our point of view representing British consumers, we would like the government and the leaders of the country to negotiate a deal that includes no tariffs UK to Europe or Europe to the UK because tariffs do drive inflation,” he said.

Potts said that Morrisons, which is the UK’s fourth largest supermarket chain, was well placed to handle the fallout from Brexit given that two-thirds of its products are British. But he pointed out that perishable items like fruit and vegetables would be impossible to stockpile.

Sales at Morrisons' established stores reportedly increased by 11.1 per cent in the six months to 2 August. However, profits were cut by a quarter to £148m, as intense competition kept prices low despite the additional costs – only partly offset by the business rates holiday – of extra staff, a staff bonus, protective kit and more delivery vans and lorries.

Morrisons reportedly saw orders via its website double, forcing it to boost capacity for home delivery fivefold via the likes of Amazon and a new box scheme. Potts said that Morrisons’ share of the online grocery market had risen from approximately 6 per cent earlier this year to double figures.

According to the Guardian, Morissons spent an additional £155m, including £47m in extra pay, taking on 45,000 more staff to manage the shift to online and cover for self-isolating or sick members of staff during the height of the pandemic.

Despite the drop in profit, Morrisons revealed that it would raise its half-year dividend payout by nearly 6 per cent to £49m.