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RIPPED OFF: Drivers still paying too much for road fuel, says CMA

Increases in retail fuel margins cost drivers over £1.6bn in 2023

The Competition and Markets Authority (CMA) has published an update today on the widespread action it is taking to ensure that people can get the best possible choices and prices in the face of ongoing cost of living pressures.

New analysis highlights how the cost to drivers of weakened competition in the fuel sector persists, but competition in the groceries sector appears to be more effective in bearing down on retail margins.

Road Fuel

In its third interim monitoring update, the CMA has found that:

Retailers’ fuel margins – the difference between what a retailer pays for its fuel and what it sells at – are still significantly above historic levels.
Supermarkets’ fuel margins are roughly double what they were in 2019.
The total cost to all drivers from the increase in retail fuel margins since 2019 was over £1.6bn in 2023 alone.
Competition among fuel retailers is failing consumers, just as it was in July last year when the CMA published its road fuel market study.

When the CMA published its road fuel market study report, it recommended that a smart data driven fuel finder scheme be set up to make prices available to motorists across the UK in real time, such as through map apps and sat-navs. This will be backed up with ongoing monitoring by the CMA to hold the sector to account. This scheme could save drivers up to £4.50 each time they fill up, as it would make it easier to find cheaper fuel in their area.

The CMA is currently monitoring developments in the fuel market using information provided voluntarily by fuel retailers. It has created a temporary price data-sharing scheme, and it is positive that some major players have started to integrate this into consumer-facing products, like apps. However, the current scheme covers only 40% of fuel retail sites and is not comprehensive enough to be utilised by map apps or sat-navs to bring accurate, live information to people – and this is what would have a substantial impact on the market.

The proposed introduction of the Digital Information and Smart Data Bill by the new government could provide the legislative basis to set up a compulsory and comprehensive scheme that would change this – which the CMA would welcome.

Legislation – which is needed to establish the scheme fully – may take time to come into force. So that motorists can start to benefit from quicker, easier access to fuel prices through everyday apps sooner, the CMA encourages the government to introduce an enhanced interim voluntary scheme that is as close to the final scheme as possible.

Richard Evans, head of technical services at webuyanycar comments: “Rising motoring costs are unsurprisingly taking a toll, as our research revealed 4 in 10 drivers (40%) trying to drive less as a result of expensive fuel.

“As households unfortunately feel the pinch from rising costs across the board, there are a few things drivers can do to get the most out of their fuel. The more weight a car is carrying, the more fuel it will consume, so remove anything that isn’t needed.

“Driving habits have a huge impact on fuel consumption; making sure to accelerate gently and use the highest appropriate gear will help to use as little fuel as possible. And, keeping a car in good condition can also help to improve fuel consumption, as fuel won’t be wasted on broken parts.

“Amidst the fluctuation of fuel prices, it’s also important that drivers are aware of the cost to fill up and where they can get the best deal in their local area. Drivers can use our fuel cost calculator to estimate their weekly, monthly (and even annual) fuel spend.”

Groceries

Many households have been struggling to put food on the table. Last year the CMA launched a wide-ranging project looking at competition and prices in the groceries sector, to make sure that people can get the best deals possible when they are shopping for essentials.

Retailer profitability analysis

In the CMA’s review of the sector in July 2023, it did not find widespread evidence of weak competition: profit margins were historically low; consumers were switching to get the best deals; and the lowest-price retailers were gaining market share from others. But the CMA committed to have another look at this and monitor margins as costs came down.

Overall, the updated retailer profitability analysis that the CMA has published today should provide shoppers with reassurance that competition in the groceries sector appears to be effective in bearing down on retail margins.

Grocery retailer revenues, profits and margins have increased slightly, in aggregate, in the most recent year (FY 2023/24), as inflation has eased. However, the CMA found that the average operating margin for grocery retailers was less than 3% last year, which remains below pre-pandemic levels. Overall, this does not give the CMA cause for concern about the general state of competition in the groceries sector.

Pricing

The CMA has also been investigating a range of pricing issues, to help shoppers access clear and accurate pricing information:

When shoppers are looking for the best deal possible, they need to be able to easily compare the prices of similar items. Unit pricing can help with this, but a lack of consistency or accuracy can cause confusion. The CMA has identified a number of concerns with retailers’ unit pricing practices, some of which stem from the legislation itself – the Price Marking Order (PMO) 2004, which allows for inconsistences in retailers’ practices, including when products are on promotion. The CMA has recommended changes to the PMO and the Northern Ireland PMO which will help people access better information when they shop, and encourages the government to implement these changes.
Alongside this, the CMA has published guidance aimed at independent retailers to help them display clear and accurate prices in general.
Shoppers are looking for deals more than ever, and, increasingly, supermarkets offer special prices only for customers that use their loyalty schemes. The CMA has been assessing whether the savings on offer through loyalty schemes are genuine. The analysis – involving tens of thousands of loyalty price promotions – is ongoing, but the results to date suggest it is unlikely to identify widespread evidence of loyalty promotions that mislead shoppers. The CMA has commissioned a consumer survey to understand consumer attitudes and the impact of loyalty pricing on how we shop around and compare prices. The CMA will report on this work in November.

Infant formula

Infant formula is a vital part of the weekly shop for many parents and carers.

Through our review of the groceries sector, the CMA identified significant price rises for infant formula (over 25% between 2021-23) and launched a formal market study in February. Five months into the study, the CMA has concerns that the combined effect of the current regulatory framework, the behaviour of suppliers, and the needs and reactions of consumers buying formula, may be resulting in people paying more than they need to.

The CMA will publish an interim report in October setting out in full the concerns it has in this market and its provisional recommendations for action to improve it.

Sarah Cardell, Chief Executive of the CMA, said: “At a time when household budgets are under huge strain, it’s our job to make sure people can be confident they are getting good deals and that they are not being harmed by weak competition or unfair sales practices.

“Despite inflation falling to 2%, many people are still struggling to pay for everyday items – whether it’s filling up at the pump, buying groceries, feeding babies, treating ill pets, or having somewhere to live.

“Last year we found that competition in the road fuel market was failing consumers, and published proposals that would revitalise competition amongst fuel retailers. One year on and drivers are still paying too much.

“We want to work with government to put in place our recommendation of a real-time fuel finder scheme to kick-start competition among retailers. This will put the power in the hands of drivers who can compare fuel prices wherever they are, sparking greater competition.”

A full list of the CMA’s work to help tackle cost of living pressures – including any recommendations already made – can be found on its collection page.

Help for Households? Chancellor to meet with food manufacturers

The Chancellor will meet with food manufacturers on Tuesday to discuss the cost of food and explore ways to ease pressure on households
He is also due to meet the Competition and Markets Authority about their investigations into the fuel and grocery markets
Government will look at reforms around unit pricing, to make it easier for consumers to compare the prices for similar products

The Chancellor will meet with food manufacturers today (Tuesday 23 May) to raise concerns about the high price of food in the UK and discuss measures the government can take with industry to ease the pressure on households.

Building on engagement between the Chief Secretary to the Treasury and the UK’s biggest supermarkets earlier this month, the Chancellor will ask food manufacturers to do what they can to support consumers.

As crucial players in the supply chain to supermarkets, this follow up meeting with food manufacturers will help ministers better understand the challenges firms are grappling with as inflated prices continue to plague the economy. The food and drink manufacturing sector is the largest in the UK, accounting for nearly 20% of total UK manufacturing and employing almost half a million people across the country.

On the same day, the Chancellor will meet with the independent Competitions and Markets Authority (CMA) to discuss the scope of their investigations into road fuel and groceries markets, including the possible action they could take if they are dissatisfied with the level of competition in the sector which could be allowing higher prices to prevail.

The government wants it to be easier for consumers to compare the prices of products, and the CMA is currently reviewing the use of unit pricing both in-store and online in the groceries sector. The government will consider updating pricing rules, including by strengthening the Price Marking Order 2004 (Retained EU Law), after the CMA review has concluded.

While rising food prices in the UK are in line with the EU average and headline inflation fell by 0.3 per cent last month, food inflation grew to 19.2 per cent. Food inflation disproportionately affects low-income households, who spend more of their income on food and are less able to swap what they would usually buy for cheaper alternatives.

Chancellor of the Exchequer, Jeremy Hunt, said: “High food prices are proving stubborn so we need to understand what’s driving that.

“That’s why I’m asking industry to work with us as we halve inflation, to help ease the pressure on household budgets.”

Chief Executive of the Food and Drink Federation, Karen Betts said: “We are looking forward to discussing the multiple drivers of food price inflation with the Chancellor, which have caused the fastest acceleration of food prices in a generation.

“Despite manufacturers’ best efforts in recent months to absorb rising costs in their margins, these have been both persistent and broad-based – from ingredients to energy and labour – making price rises unavoidable.

“We believe food and drink price inflation is close to its peak, and food and drink manufacturers will continue to work hard to keep prices as low as possible, conscious of the pressure on hard-pressed households.

“Government can help too, for example by urgently reviewing upcoming packaging recycling regulations to make them more efficient, by working with us to address labour and skills shortages, and by keeping to a minimum the labelling changes required of companies as a result of the recent agreement with the EU on the movement of food and drink to Northern Ireland.”

The government says it has acted decisively to help struggling households with rising prices, pledging to halve inflation this year and taking action to bring down bills for families. This includes introducing the Energy Profits Levy on oil and gas companies to pay almost half of a typical household’s energy bills, freezing fuel duty and taking difficult decisions on government spending to make sure we do not fuel inflation further.

One of the most generous support packages in Europe has also been rolled out, worth £3,300 per household on average over this year and last. Benefits and state pensions have been increased by over 10 per cent, up to £1,350 in direct cash payments are being made to millions of vulnerable households and record uplifts in the National Living Wage mean someone who is currently out of work and takes a full-time job will be over £7,500 better off.

Extra support has been put in place to help the most vulnerable with high food prices, including the £2.5 billion Household Support Fund which provides local authorities with money to support their communities with the cost of essentials, the £200 million Holiday Activities and Food Programme which supports children on Free School Meals with a nutritious meal during the holidays and an expansion of Free School Meals to all 5-7 year-olds.

The Prime Minister and Farming Secretary brought together representatives from across the UK food supply chain last week, where they outlined a range of measures to help strengthen the long-term resilience and sustainability of the sector and put farmers at the heart of plans to grow the economy.

Supermarket convenience store shoppers spend £320 more a year on their groceries

Sainsbury’s Local and Tesco Express customers are paying up to £320 and £280 respectively more a year than those who shop at larger stores for the same items, new Which? analysis has revealed.

The coronavirus pandemic has had a significant impact on consumers’ shopping habits, with many people avoiding large supermarkets in favour of shopping online or using convenience stores near their homes.

But while convenience stores have been a lifeline for many people during the pandemic, they are not the most economical way for consumers to shop as prices tend to be higher.

More than half (51%) of Which? members surveyed who used convenience stores said cost was one of their biggest bugbears.

To determine how much more customers could be spending at supermarket convenience stores compared to their larger stores, the consumer champion analysed the average weekly price of 48 own-label and branded groceries for five months in 2020 across the two largest convenience chains – Sainsbury’s Local and Tesco Express – and compared it with the cost of the same items at their supermarket counterparts.

Which? found customers could be paying 9.5 per cent more a year (£322) at Sainsbury’s Local than they would at a regular Sainsbury’s supermarket.

On average, the shopping list of 48 items, which included Napolina Chopped Tomatoes and McVities Ginger Nut biscuits, cost £71.26 a week at Sainsbury’s Local compared to £65.08 at a Sainsbury’s supermarket – an average weekly difference of £6.18 and £322 annually.

Which? also found Tesco Express customers could be paying 8.4 per cent (£279) more a year compared to those that shop at a larger Tesco supermarket. The shopping basket of 48 items would cost £69.12 at Tesco Express compared to £63.75 at a Tesco supermarket – a difference of £5.37 a week and £279 annually, on average.

At Sainsbury’s the products with the biggest price difference were a 400g can of Napolina Chopped Tomatoes, which was a third more expensive at Sainsbury’s Local, and a 250g packet of McVitie’s Ginger Nut Biscuits, which was just over a quarter pricier at a Sainsbury’s Local store compared to a larger supermarket.

A number of Tesco own-label products were a quarter (23%) more expensive in Express stores than in supermarkets, including Tesco 0% Fat Greek Style Yogurt (500g) and Tesco Orange Juice With Bits, Not From Concentrate (1lt).

In some cases, however, products were the same cost or even a fraction cheaper in the convenience store. For example, a 500ml bottle of Flash spray with bleach was the same price (£1) at Sainsbury’s Local, Tesco Express and the supermarkets, while McVities Digestives were on average 1p cheaper in the smaller stores.

Which? shared its findings with Sainsbury’s and Tesco. Sainsbury’s said that product price is influenced by a variety of factors including special offers, while Tesco said that rents, rates and operating costs are higher in built-up areas.

The use of convenience stores increased during the first lockdown, offering an alternative for those who preferred not to travel or queue for supermarkets and – particularly in the case of local stores that launched delivery services – a lifeline to vulnerable and shielding people.

A Which? members survey found three in five (61%) had shopped at Costcutter between one and three times a month in the eight months after the first nationwide lockdown began in March, compared to less than one in 10 (7%) before the pandemic.

Similarly, one in five (20%) had shopped at a Co-op four to six times a month since spring 2020, compared to just 12 per cent before lockdown.

Natalie Hitchins, Head of Home Products and Services at Which?, said: “Convenience stores have been a huge help to many of us during the pandemic. However, our research shows that shoppers who rely solely on supermarket convenience stores, rather than their larger stores for their groceries, are paying a premium.

“Customers will generally get more for their money at larger supermarket stores, but for some products, the price difference may not be significant, so it is always worth checking prices to make sure you are getting the best deal.”

	Average week	Week with greatest difference	Average annual cost and difference
Sainsbury’s
Main store	£65.08	£62.85	£3,384
Local store	£71.26	£73.05	£3,706
Difference	£6.18	£10.20	£322
Tesco
Main store	£63.75	£61.96	£3,315
Express store	£69.12	£70.81	£3,594
Difference	£5.37	£8.85	£279

A Sainsbury’s spokesperson responded: “We’re committed to offering our customers the best possible value.

“The price of our products is influenced by a range of factors, including promotions which can vary between Sainsbury’s supermarkets and convenience stores.”

A Tesco spokesperson said: “Our Tesco Express stores are mainly in built-up areas where unfortunately rents, rates and the operating costs for these stores are higher.

“The difference in prices of some products reflect these increased costs, but our prices remain competitive as we strive to offer great value to our customers.”