James Bartholomew has a nice piece in the Telegraph. This rip off Britain we keep hearing about. Just why are British supermarkets more expensive than those abroad?
The second objection is that supermarkets still
overcharge, despite their "oppression" of farmers, compared with shops
in other countries. The Government knows the reason for this, even if
most commentators appear not to.
When it came to
power, the Government commissioned McKinsey, the management consultant,
to look at the issue. The answer? We pay higher prices because British
supermarkets have been so hemmed in by planning restrictions that they
are much smaller than stores in France and the United States.
The
average French supermarket is 50 per cent bigger, even without
including the vast clothes selection many also contain. American
supermarkets are 90 per cent bigger. Extra size means economies of
scale, which mean they – and their suppliers – can gain economies of
scale.
The savings are passed on to consumers –
not through kindness but because of competition. Prices are lower
abroad because supermarkets in certain countries are less opposed.
They
can get planning permission more easily, they can build bigger and so
they can sell more cheaply. There is no "rip-off Britain". The return
on capital of British supermarkets is no higher than those on French or
American supermarkets. They are just smaller.
I have vague memories of a similar, earlier, report into CD prices. British retailers faced higher property costs as a result of the more restrictive planning process so margins, as one would expect, were notably higher.
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