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Weekly Media Briefing


This week's topis;

  • Future of budget food brands - can retailers protect consumers from inflation? 

  • Consumer Sentiment falls but remains above average levels

  • Energy price cap - costs and benefits of regulatory choices and managing volatility

  • Ethnicity pay gap reporting can’t be put off - PwC data reveals the extent of pay disparities


Can retailers protect consumers from inflation?

With inflation at a 30-year high, supermarkets have faced pressure to hold the price of basic goods and ensure value products are widely available. Kien Tan, Senior Retail Adviser at PwC, outlines what’s happening and the impact on consumers:

  • On a like-for-like basis, supermarkets have worked hard to keep inflation down to date, and have broadly held down food prices. With the growth of discount competitors, this has also led to price-matching on many basic grocery products.  

  • However, not all products are available in all stores or online at all times. This is due to a combination of out of stock items (exacerbated by the trucker crisis last year), product range reductions that began at the start of the pandemic (in order to ensure security of supply), and decisions by supermarkets to not stock lower margin products including ‘basics’ in some, typically smaller, stores.

  • A number of supermarket chains are now reversing their decision to remove lower margin, ‘basics’ products from smaller stores.


What this means for supermarkets and consumers

  • British supermarkets understand their customers are facing rising costs - energy and goods, for example - because they’re experiencing this too, alongside operating costs such as staff wages.  

  • Responding to growing demand for basic brands in more stores, including those stores with higher operating costs (e.g. smaller stores, convenience stores and online), is likely to accelerate cost-saving action. This might include the closure of smaller and less profitable stores, reduced operating hours, reduced services (e.g. closure of deli counters) or automation through the supply chain. Suppliers may also feel pressure to limit price increases.

  • It will also increase the price differential between large supermarket chains and independents and other local stores that are unable to prevent passing through price increases.


What’s the retail outlook for 2022 as consumer sentiment falls slightly?

  • PwC’s January 2022 Consumer Sentiment Index saw sentiment fall slightly to -6. But although it falls into negative territory for the first time since January 2021, it remains slightly above long-running average levels. 

  • Sentiment has declined across all demographics and nearly all age ranges, with only under 25s showing a slight increase in sentiment. 

  • Inflation, alongside pent-up demand, is driving spending priorities over the next 12 months. Consumers are expecting to spend more on groceries, home improvement, eating out and going out relative to previous years. A higher spend on holidays is expected as restrictions continue to ease. Net spending intention is now higher for every category than for the previous two years, even as consumers look to trade down on many categories. 

  • Ultimately, there will be concerns in 2022 for retailers: declining consumer sentiment, inflation, interest rate and tax rises, leisure squeezing retail spend, and a need to focus on ESG. But each of these can offer opportunities: sentiment is still strong, employment and wage growth should remain, lockdown savings and pent-up demand, a continued focus on nesting, and the return of (domestic and international) holidays can be a benefit for areas such as fashion and beauty. 


Adrian del Maestro, PwC’s Strategy & energy director, comments on the energy price cap, gas price volatility and the consumer impact

  • The impact of protecting customers from failed suppliers is becoming apparent, with acquiring companies now able to claim back initial costs. An average of £68 per household, for example, has been incorporated into the current cap level and, as the full financial impact is realised and  this will undoubtedly be reflected in future cap determinations. 

  • Given the larger total cap level, the differences (by geography and customer type) are now stark which will prove challenging especially for vulnerable customers. For example, a customer paying by cash or cheque could now, on average, pay £130 more than a direct debit customer each year.

  • Continued volatility in global gas prices has brought about spikes in natural gas costs. The regulator has had to retrospectively allow an extra £59 per household to cover the unexpected demand for standard variable tariffs (SVT), as customers on fixed deals chose to default onto their supplier’s SVT rather than switch to another package, given it was protected by the price cap and fixed deals were not.

  • Looking forward, customers will likely face a more changeable environment as Ofgem now has the power to change the price cap level within the period (i.e. between the usual six monthly updates) if needed in extreme circumstances and is consulting on making it a quarterly update as standard. This should protect customers from big shifts, like the ~50% increase we have seen forecast for April this year.

  • Rising consumer concerns around the affordability of utility bills also highlights a broader emerging theme around the ability of society to pay for net zero ambitions.


Ethnicity pay gap reporting can’t be put off

  • report released by the House of Commons committee this week called on the Government to introduce mandatory ethnicity pay gap reporting by April 2023 for all organisations that currently report for gender. The report also notes the number of employers publishing their ethnicity pay gaps has been increasing.

  • PwC UK research shows that ethnicity pay gaps exist in every region in the UK and that, on a like-for-like basis, white British people earn more on average than people from almost every other ethnic group. For people working in London for example, people from ethnic minority groups earn on average £14.76 an hour - more than 20% less than their white counterparts who make £18.47. 

Katy Bennett, Diversity and Inclusion Consulting Director at PwC UK, comments: 

  • The ethnicity pay gap remains a pressing issue in the UK. Our research underlines the extent to which workers from ethnic minorities across the UK are still earning less than their white counterparts.

  • While we wait for confirmation of the Government’s position on mandatory reporting, the number of companies voluntarily publishing their ethnicity pay gap is increasing. There are challenges to collecting the relevant data but the growing number of companies that are publishing their ethnicity pay gaps show it is possible. Overcoming these data challenges is key to identifying where action is most needed to drive meaningful, measurable change. 

  • Transparency on pay gaps is key to showing your people, prospective talent, investors and customers that you care about, and are taking action towards, inclusion.

For more of PwC’s data on the ethnicity pay gap in the UK, contact for a copy of the ‘The Ethnicity Pay Gap Report 2021’. PwC’s own Diversity Pay Report is available here.


Something to read: Recruitment alone is not enough to close the skills gaps in financial services. A new report from PwC and the Financial Services Skills Commission makes the case for reskilling workforces across the country, with financial services firms able to save up to £49,100 per employee reskilled. Read more here. 

Something to listen to: What should pension schemes be doing about ESG? In the first episode of the PensionsCast podcast, PwC’s global head of pension Raj Mody joins other experts to discuss how pension schemes can get ahead and lead when it comes to ESG measures and regulation. Listen on Spotify or iTunes.

Something to watch: To celebrate National Apprenticeship Week, school and college leavers share their experience and tell us what working at PwC means to them. Watch here.


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