The governor of the Bank of England has accused retailers of putting further strain on households by overcharging consumers on petrol and other goods at a time when UK authorities are struggling to curb inflation.
Andrew Bailey suggested unnecessarily high fuel prices would have to be tackled in order to help bring inflation – which is above 8% – back to the Bank’s 2% target and give some relief to families struggling with the cost of living.
“If you look at petrol prices, some sellers of petrol have possibly been charging too much for it,” he told the BBC’s Newsround programme in an interview broadcast on Thursday. He added that action by regulators including the Competition and Markets Authority (CMA) was helping to subdue high inflation but it was fairer if possible overcharging was “tackled”.
Bailey’s comments will heap further pressure on petrol retailers, which the energy secretary, Grant Shapps, accused this week of using motorists as “cash cows” after the CMA found fuel sellers were charging more because of reduced competition since the Covid crisis.
Watchdogs including the CMA have also been working with government, and last week agreed to a series of measures aimed at protecting consumers from being ripped off.
Concerns have been growing about wider “greedflation” – whereby companies use high inflation as a cover to raise prices even further to increase profit margins. The government has now instructed regulators to crackdown on unfair price hikes across the country.
Retailers have fought back against the accusation. Martin Scicluna, the chair of Sainsbury’s, defended the UK’s second-biggest supermarket chain at its annual shareholder meeting on Thursday.
He said: “To be very, very clear, we are not profiteering and we are not rip-off retailers. We make 3p on every pound we sell.”
His comments were echoed by Alex Baldock, the chief executive of Currys. Baldock said the electricals retailer had “kept a lid on price rises” despite improving profit margins and that making less than £3 on every £100 of technology sold was “hardly excessive”.
Last month, the chief executive of Tesco said heavy competition in the UK meant supermarkets were “consistently having to be the sharpest possible in terms of value”.
Ken Murphy urged the government to help tackle inflation by easing regulations linked to Brexit, which he said had had a “meaningful impact” on the cost of importing groceries into the UK from the EU.
However, Bailey said greedflation was “having very difficult effects. So it’s important that these steps that can be taken to make things fairer, and to save money for people by doing so, are taken.”
The Bank of England has raised interest rates to 5% – the highest since 2008 – a move Bailey said was necessary to curb price inflation in general, even though it put further pressure on borrowers.
“It’s hard and I think I understand very much the difficulties that people face. Unfortunately, this is how we have to get inflation down. And what I will say is if we don’t get inflation down, if it keeps going on, it gets worse … and we’ll have to put interest rates up more,” he said.
While inflation has already started to ease, Bailey said rates were only expected to drop back down towards the 2% target by the end of next year.
“We have a target that prices should rise by no more than 2%. It is above that, at about 8% at the moment. And I understand this is difficult for people who are having to make very difficult choices about what they buy what they need for their lives,” he said.
