LONDON (Reuters) - British food prices are likely to rise over the next two years as a negative impact of trade tensions with the United States and China spills over into the Brexit-bound domestic market, the boss of Marks & Spencer (MKS.L) said on Friday.
FILE PHOTO: The Marks & Spencer market stall is seen at a shopping street in London, Britain May 23, 2016. REUTERS/Neil Hall/File Photo
Britain’s vote to leave the European Union in 2016 and its talks with the rest of the EU have raised fear that trade ties will weaken or shift, widening the price gap between the EU and the United States, where there are concerns about U.S. tariffs.
Britain’s economy has so far largely weathered the Brexit storm, thanks to a weaker pound, the country’s slowest wage growth for a decade and super-low borrowing costs.
But M&S boss Steve Rowe said in a trading update that food inflation could rise to 3.5 percent, after climbing to 2.6 percent in the fourth quarter.
“The availability of volume and the cost of input -- really the only issue for us is freight because it is very short distances, with less foreign-based trucks, so this is going to put upward pressure on food prices,” Rowe told reporters.
He said that every retailer would seek to ensure they got the cheapest prices possible, but there were likely to be higher costs and lower profits.
“I think you’re going to see the same headwinds as retailers around the world,” he said.
The government has insisted that Britain will continue to sell goods and services abroad on tariff-free terms after Brexit.
Last week M&S reported a fourth consecutive fall in underlying clothing and homeware sales, reflecting the weakness of Britons’ finances and difficulty in turning up the heat on competitive rivals.
“We have taken the right decisions to position M&S for the future, but our performance so far in this financial year has not been good enough,” said Rowe.
The retailer is expected to report that its like-for-like annual profit fell 3.5 percent.
Rowe said he aimed to rebalance M&S’ business by 2025 through a mix of opening 100 new clothing and home stores and maintaining the level of discounting, thanks to favourable market conditions and the recovery of core food markets.