The boss of Morrisons, the country’s fourth largest supermarket chain, has warned prices will go up unless there is a tariff-free deal to leave the European Union.
David Potts told journalists that it was particularly important to avoid inflation during a recessions and the chain “can’t defy gravity” despite a recent push to lower prices on cupboard essentials.
" Tariffs will drive inflation and in any year we don't want to see increased prices, but particularly in a recession year. We appreciate that it's complex but we would like the focus to be on a no-tariff deal," he said.
The supermarket, however, is somewhat protected compared with some of its rivals as two thirds of what it sells is sourced at home.
Mr Potts added: "From our point of view representing British consumers we would like the government and the leaders of the country to negotiate a deal that includes no tariffs UK to Europe or Europe to the UK because tariffs do drive inflation."
His remarks came as sales at Morrisons surged through lockdown. But profits took a £155m hit after it had to hire more staff to cope with demand for home delivery and click-and-collect as well as costs related to keeping its own staff safe in stores and extra waste. The chain has installed 28,000 plastic screens in its branches.
The Bradford-based retailer reported an 8.8pc increase in total revenue to £7.55bn for the half year to Aug 2, while like-for-like sales also jumped by 8.7pc, excluding fuel.
Pre-tax profits slipped by a quarter to £148m, which were partly offset by £93m it made in savings from the Government’s business rates holiday.
The company expects profit growth in the second half as grocery sales remain robust, it said. It slashed prices for 400 products this week as consumers grow increasingly concerned about their finances.
Morrisons has also expanded its online and home delivery capacity five-fold after the pandemic dramatically boosted demand for groceries bought over the internet.
The company launched a tie-up with Deliveroo that has now expanded to 180 sites and it sells its goods through Amazon as well.
Mr Potts said he believed the country was seeing the renaissance of British supermarkets.
He added: "From the start of the pandemic we stepped up and put the company’s assets at the disposal of the country to help feed the nation.
"We are now looking forward to holding on to what we created in the first half, building a broader, stronger Morrisons."
The retailer declared an interim dividend of 2.04p per share, an increase of almost 6pc, but sidelined plans to pay out a special dividend. Rival Tesco had to defend a £635m dividend payout it announced at the peak of the crisis.
Analysts at Jefferies said: "[Morrisons’] defensive merits are confirmed, underpinned by a fast-growing online offer and ongoing progress in strengthening the core proposition."
Shares fell 4.1pc to 187.1p in early trading.
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