Milk mark-ups hit 30-year high at UK retailers

UK retailers’ mark-up on milk has hit a 30-year high, in an indication that companies have used the recent surge in inflation to pad out their profit margin on the consumer staple.

For decades, the retail price of a pint of milk was 25-30p higher than the farm gate price. But by March this year it had climbed to 44p, according to data from the Office for National Statistics and the Agriculture and Horticulture Development Board.

Competition in the UK supermarket sector is usually a cut-throat affair, so the increased mark-up suggests that consumers are becoming more used to high inflation, economists said.

Paul Donovan, chief economist at UBS Wealth Management, called it a prime example of “profit-led inflation” — when consumers hear so many stories about rising costs that they accept an even bigger price rise as fair.

However UK officials do not think this kind of “greedflation” is widespread or explains the overall pattern of high inflation. Excluding energy, UK corporate profits as a share of GDP were the lowest since 2009 last year. Competition authorities say they have no evidence of specific concerns in the grocery sector.

Retailers’ margins are often squeezed again when consumers start to question whether price rises are fair, Donovan said. There is some indication this may have started in the UK milk trade: last month, big supermarkets began to cut their milk prices.

Delphine Strauss

Our other charts of the week . . . 

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US multinational corporations offshore much of their profits to low-tax jurisdictions, according to data from the Peterson Institute for International Economics (PIIE).

Seven of the top 10 most popular locations for offshoring have historically had an effective corporate tax rate of under 10 per cent. These countries accounted for over half of US companies’ foreign profits in 2019, compared with only around 30 per cent in 2000.

US policy incentivises offshoring as foreign assets face lower rates of tax than domestic assets, according to testimony to the US Senate Committee from Kimberly Clausing, professor of tax law and policy at the University of California.

The OECD is seeking to introduce a global minimum rate of corporate tax but the agreement — originally agreed between 136 countries in 2021 — has not been implemented because it is struggling to achieve sufficient support in the US Senate.

Amy Borrett

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Americans are losing confidence in key economic leaders, just as their country faces a looming deadline to increase the government’s debt limit, and the threat of a possible economic recession.

Just 36 per cent of Americans surveyed by Gallup said they had a great deal or fair amount of confidence in Federal Reserve chair Jay Powell to do or to recommend the right thing for the US economy — the lowest level of confidence in a Fed chair for more than 20 years.

In the past year confidence has also declined for president Joe Biden and treasury secretary Janet Yellen, Gallup found.

Federica Cocco

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Last year the Netherlands produced twice as much energy from solar power as the average EU country and 10 times more than Sweden, according to the BP Statistical Review of World Energy.

While solar energy still accounts for a small portion of the Netherlands’ electricity production — around 14 per cent — it has made rapid progress, doubling in the last two years.

However, the Dutch government recently voted to phase out the country’s net metering system, which has been in place since 2004. The scheme created a financial incentive for households to invest in solar panels by awarding credits for surplus power.

Cleve Jones

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Most people in advanced economies think their country would be better off by being open to change, rather than by sticking with traditional ways of life, according to a survey by Pew Research Center.

As the world faces “rapid technological advances, economic upheaval and evolving values”, countries are embroiled in “heated political debates” about how to react to these types of change, Pew said.

People in the Asia-Pacific region were particularly open to change, with more than seven in 10 holding this view in South Korea, Singapore and Australia.

The most notable exception was Greece, where most people said their country would be better off by holding on to its traditions.

Younger people, those on the ideological left and those with higher education levels tended to embrace change more than older people, those on the ideological right and those with lower levels of education.

Ella Hollowood

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