Supermarkets threaten small businessesStore chains are killing small shops, say MPs

15 February 2006

Predatory supermarkets and large chains could drive many small shops out of business over the next decade, MPs are warning.

The All Party Parliamentary Small Shops Group blames poor regulation of the retail sector for high streets where independent stores have been squeezed out. It now wants a moratorium on store mergers and takeovers, and an independent czar to investigate the entire sector.

The committee's 'High Street Britain: 2015' report also hits out at the Big Four supermarket chains - Asda, Morrisons, Sainsbury's and Tesco - for aggressive and competitive tactics.

The report also accuses the supermarkets of occasionally resorting to anti-competitive measures. For example, it says that customers at a Tesco store in Withernsea, Humberside, were offered GBP 8 off for every GBP 20 spent in the branch - a 40 per cent discount - which harmed a nearby supermarket called Proudfoot.

'Predatory act'

The report says: '[The fact] that this promotion was limited to the Withernsea catchment further indicates that this was a predatory act which has damaged the Proudfoot supermarket.'

Petrol forecourts were another area where large chains set low prices to beat off local competition, said the MPs.

The report focused on Sainsbury's forecourt pricing in three Hampshire towns. The supermarket offered petrol at 86.9p per litre in Farnham and Basingstoke where there was strong local competition, but at 89.9p per litre in Alton where there was limited local competition.

The report warns that 'many small shops across the UK will have ceased trading by 2015 with few independent businesses taking their place. Their loss, largely the result of a heavily unbalanced trading environment, will damage the UK socially, economically and environmentally.'

Scale economies

But British Retail Consortium Director General Kevin Hawkins accused the MPs of trying to turn back the clock.

'The committee has entirely overlooked or not understood the critical importance of scale economies, not just in retailing, but in virtually every other sector of a mature economy such as that of the UK. No set of regulations can override the drivers of a modern competitive retail business.'

Tesco corporate affairs director Lucy Neville-Rolfe, who gave evidence to the inquiry, said she didn't believe small shops were in terminal decline.

'People use both supermarkets and small shops at different times and, as the report acknowledges, the retail market is fiercely competitive. My conclusion is that the consumer is the best regulator and there is room in a thriving market for anyone who satisfies customers.'