Which? today shines a light on the companies that have been hiking prices for groceries, cars and other goods since last year’s vote to leave the EU.
Inflation (the Consumer Prices Index) rose sharply again to 2.9% last month; in June 2016 it was 0.5%. More than a year after the referendum, when the value of sterling fell, we’re still feeling the impact on our pockets with the prices of food, wine, technology, holidays and new cars all rising.
But are some brands’ prices rising more than the rest? Which? analysed hundreds of prices and found rises of up to 22% for certain big-name brands such as Vauxhall cars and Kellogg’s cereal. We put the manufacturers’ explanations to experts for scrutiny.
Sterling down, prices up since the vote
Although, exchange rates aren’t the only factor in price rises, products that include parts or ingredients imported from the EU are usually affected when sterling loses value. Between June and October 2016, the pound fell by 15% against the euro (and has continued to fall since, before a recent recovery) and by 18% against the US dollar.
The graph below shows inflation against the £:Euro exchange rate between January 2016 and July 2017.
Food prices up
Food and drink prices have risen since the Brexit vote, but which brands’ rises stand out? Using Mysupermarket, an independent shopping site that covers all the major supermarkets (Tesco, Asda, Sainsbury’s, Morrisons, Waitrose and Ocado), we compared the average prices of products between April and June this year with the same period last year.
We found price increases for many groceries – butter, cakes, jam and fish, for example – but particularly striking hikes for brands of cereal, coffee, tea and mayonnaise. A 100g jar of Gold Blend cost 12% more year-on-year at £3.70; Kellogg’s Crunchy Nut 750g cost 22% more, at £3.23, and a jar of Hellmann’s Mayonnaise cost around 8% more at £1.88 for 400g. The price of 160 Tetley teabags increased by 13% to £4.01.
All of the manufacturers we spoke to pointed out that supermarkets set final prices. Kellogg’s said its recommended retail price of a 750g pack of UK-made Crunchy Nut rose last year from £3.29 to £3.49 (6%). It denied that it had increased the price by as much as 20%. Nestlé, producer of Gold Blend coffee, said it increased prices ‘only when absolutely necessary’.
Unilever said the cost of the raw materials and packaging of Hellmann’s mayonnaise had increased, and it ‘always tried to absorb’ as much of this as possible before raising prices. Tetley blamed rising production costs and exchange-rate shifts which had affected commodity prices
The supermarkets do indeed set these prices (including discounts and excluding multibuys), but of course they are affected by the manufacturers’ recommended retail price. Some rises won’t be due to exchange rates alone, but are affected by supply factors, such as a poor harvest.
Cars cost more
The starting price of some new car models has risen by over 20% since the decision to leave the EU. Using figures from the car-price database PHA Autodata, we analysed the prices that people are paying for Britain’s top 10 bestselling new cars and compared starting prices during summer 2016 with those of a year later (see the table below).
In the year to July 2017 the starting prices for the Ford Fiesta and Focus – the first and third bestselling cars last year – rose by 17.8% and 14.8% respectively, to £12,427 and £15,813. We saw similarly large rises in the lowest prices for new Vauxhall Corsas and Nissan Qashqais. These increased by 21.8% and 12.6% to £11,698 and £19,295 respectively.
We asked car manufacturers to explain their price rises since the Brexit vote. Ford said: ‘Our UK vehicle sales in sterling have to cover majority production costs in euros. Towards the end of last year we put a value on the impact of weaker sterling on European operations. A combination of ‘a softer industry and exchange’ caused $200m (£153m) of lost revenue in 2016, and that this continued into 2017.’
Vauxhall told us: ‘There have been several price increases since the referendum when the pound plummeted – price lifts have varied by model depending on country of origin.’
Nissan said: ‘The price you have for Qashqai is the new model, just launched. However, the Qashqai price increase is slightly below the category increase over the last 12 months, even with the transition to new Qashqai.’
Our expert, car-price specialist Pat Hoy, said the main trend he’d observed was price increases resulting from dealers and manufacturers ‘weaning car buyers off unsustainable levels of cash discounts’ seen in recent years. He added ‘..they may also be part of a wider strategy to get the market set right ahead of actual Brexit in 2019.’
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2016 v 2017 average starting prices for the top 10 new car models in the UK
|Price from August 2016||Price from July 2017||% change|
|1. Ford Fiesta*||£10,553||£12,427||17.8%|
|2. Vauxhall Corsa||£9,602||£11,698||21.8%|
|3. Ford Focus||£13,774||£15,813||14.8%|
|4. Volkswagen Golf||£16,180||£16,394||1.3%|
|5. Nissan Qashqai||£17,140||£19,295||12.6%|
|6. Vauxhall Astra GTC||£19,010||£20,082||5.6%|
|7. Volkswagen Polo GTI||£17,648||£18,190||3.1%|
|9. Mercedes-Benz C-Class||£25,869||£26,523||2.5%|
|10. Audi A3||£18,029||£18,688||3.7%|
* Fiesta price is from September 2016 to reflect change of specification. Source: PHA Autodata/SMMT
The increasing cost of technology
Prices for certain gadgets have leapt since sterling began to fall – some rather more than others. Sonos, the US wireless speaker manufacturer, increased all its prices earlier this year, including one rise of 25%.
The table below shows price increases for five popular products in the wake of the Brexit vote. The Apple and Microsoft items went up by between 12% and 19%. But the price of Sonos’s Connect music streaming system rose by 25% in February 2017.
Sonos said the Brexit vote and subsequent devaluation of sterling was the main reason for the price hikes. It added that that at the time of the February increase, it paid for all components in US dollars and the dollar-sterling rate change meant it had to increase the cost of all products priced in pounds. However, sterling has since recovered slightly, and while Microsoft cut the price of Surface tablets on its site, the prices on Sonos’s site remained the same.
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Price rises of popular gadgets
|Product||Date of change||Old price||New price||% change|
|Apple MacBook (12″)||October 2016||£1,049||£1,249||19.1%|
|Microsoft Microsoft Surface Book (128GB) (a)||February 2017||£1,299||£1,449||11.6%|
|Microsoft Microsoft Surface Book (1TB/i7)||February 2017||£2,649||£3,049||15.1%|
|Sonos Play:5 (b)||February 2017||£429||£499||16.3%|
|Sonos Connect [c]||February 2017||£279||£349||25.1%|
|(a) – Reduced to £1,199 currently on website|
|(b) – Home speaker system|
|[c] – Music streaming system|
Prices for wine and hotel rooms
Other sectors have also witnessed inflationary pressures, notably the wine and travel markets. The average price of a bottle of wine is rising significantly and UK travellers are paying up to 25% more for a hotel room in some European cities.
Toby Clark, Director of Research at Mintel, said: ‘The retail market is still competitive, meaning that most companies are working really hard to avoid having to pass on price rises to their customers, but the signs are that this will increasingly be a struggle as ‘hedging’ policies (planning ahead to protect against supply cost increases) come to an end.’
Given their extensive high level engagement with business, Which? has called on the government to involve consumer representatives in senior level Brexit discussions so that consumers’ needs are at the heart of the Brexit negotiations.
See our guide for your consumer rights and Brexit