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The Guardian - UK
The Guardian - UK
Business
Sarah Butler and Yassin El-Moudden

Asda’s profit margins at the pump have trebled, MPs told

Asda petrol and diesel pumps
Asda’s co-owner Mohsin Issa was also questioned by the business select committee but refused to say whether it had increased its profit margins on fuel. Photograph: Peter Byrne/PA

Asda’s profit margins on fuel have tripled since before the pandemic, according to the competition regulator at a bad-tempered parliamentary hearing where the supermarket chain’s co-owner repeatedly refused to explain its pricing strategy.

Mohsin Issa declined to answer multiple questions on whether Asda had increased its profit margins on fuel since its takeover in 2021, prompting MPs on the business select committee to become increasingly furious as the retailer insisted it had not changed its strategy.

The Competition and Markets Authority (CMA) published a report this month saying that drivers were paying more for petrol and diesel than before the Covid pandemic because of “weakened” competition.

The CMA told the committee there had been a “significant change” in the supermarket’s pricing approach after its £6.8bn takeover by the billionaire Issa brothers and their private equity partner in 2021. Asda is now set to buy the UK arm of the Issas’ EG Group petrol forecourts business for £2.27bn, tightening its grip at the pump.

Mohsin Issa, right, pictured with his brother, Zuber Issa, in 2019.
Mohsin Issa, right, pictured with his brother, Zuber Issa, in 2019. Photograph: Jon Super/Alamy

Petrol has become a lightning rod for concerns about the rising cost of living as soaring inflation on food, energy and other everyday essentials has squeezed household budgets.

Supermarkets are under the spotlight with the CMA also set to report on whether they have been banking additional profits on groceries – so called “greedflation”.

Jonathan Gullis, an MP on the committee, said on Wednesday that “people were being ripped off at the pump” at a time when the cost of living was “already forcing a squeeze at the till from supermarkets”. He said that only when the competition watchdog effectively “named and shamed” what was happening that “suddenly supermarkets magically managed to find a way to take 6p per litre off their costs”.

Darren Jones, the chairman of the committee, said a whistleblower had told him that under Asda’s former owner Walmart, the retailer had aimed to be at least 1p per litre cheaper than its nearest rival but the new owners had reduced that target to just 0.1p.

In faltering words, a quietly-spoken Issa refused to confirm whether that was the case, saying there were many elements that contributed to decisions on fuel pricing.

He insisted the group had not changed its strategy, saying Asda was “proud of being a price leader” and, while he refused to say directly whether the new management had increased profit margins on fuel, he suggested the group had, saying “we invested that margin into food”.

“We don’t see this as a fuel business on its own. We see this as a holistic business,” he said. The retailer’s overall profit margins had fallen from 2.7% to 1.7% under his ownership, Issa said.

He insisted he was “absolutely in touch with where customers are coming from” having grown up in a “two-up, two-down” and said Asda had invested in keeping food prices down and in its loyalty scheme.

Before Issa gave evidence, Dan Turnbull, the director of the CMA, told the committee that the chain had stuck with its strategy of being price leader but had altered course on two other aspects – increasing profit margins and to “deliberately feather” prices – or to take more time to react to drops in the wholesale price of fuel. He said this was particularly the case on diesel where there had been a lot of volatility in prices.

“We found that between 2021 and 2023 they significantly increased their internal fuel margin targets on a pence per litre basis, and indeed by 2023 those pence per litre targets were three times what they’d been in 2019,” he said.

The competition regulator has said it expects the government to bring in new legislation to ensure fuel retailers provide up-to-date pricing data to a planned comparison service.

On Monday, the energy secretary, Grant Shapps, appeared to row back on plans for a law to force supermarkets to make fuel prices more transparent, instead backing a voluntary price scheme.

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