Amid high inflation and ahead of negotiations on the U.K.’s Autumn Budget, Tesco CEO Ken Murphy has urged the U.K. government to not “make it harder” for the grocery sector to keep prices as low as possible for customers.
“As a food retailer, we operate in a very competitive and tough environment, and I think our one ask is don’t make it harder for the industry to deliver great value for customers,” Murphy said, per MSN.
In the last budget the U.K. government negotiated, the industry incurred “substantial” operating costs, including a higher rate of employer national insurance that added around GBP 235 million (USD 313 million, EUR 270 million) to Tesco’s annual costs, as well as new packaging taxes that added about GBP 90 million (USD 120 million, EUR 103 million), according to Murphy.
“We’re doing our best to deal with them, but enough is enough,” he said.
Despite the additional pressure, Tesco raised its profit outlook for the full year from between GBP 2.7 billion (USD 3.6 billion, EUR 3.1 billion) and GBP 3 billion (USD 4 billion, EUR 3.4 billion) to between GBP 2.9 billion (USD 3.9 billion, EUR 3.3 billion) and GBP 3.1 billion (USD 4.1 billion, EUR 3.6 billion). Additionally, it reported a sales increase of 4.9 percent for the first half of 2025 and an operating profit increase of 1.6 percent in the period to GBP 1.67 billion (USD 2.2 billion, EUR 1.9 billion).
Murphy attributed the increased sales to Tesco’s initiative of cutting prices on 6,500 products.
Sales of fresh food in particular have spiked as more consumers are “scratch cooking” at home, according to Murphy.
Tesco is just one of several major grocery chains in the U.K. looking to keep their lower-price initiatives in place in an attempt to appeal to inflation-weary shoppers.
In September, Aldi said it invested more than GBP 300 million (USD 400 million, EUR 345 million) in slashing prices on more than 900 items across its stores.
“Rising inflation has meant many shoppers are understandably more conscious about where they spend their money. We know how important the lowest prices are to our customers, especially as they prepare for Christmas, and we continue to offer significant savings compared to the full-price supermarkets,” Aldi UK Chief Commercial Officer Julie Ashfield said, Grocery Trader reported.
Morrisons also announced it was slashing prices on hundreds of everyday essentials. The cuts “mark the next step on Morrisons journey to help make household budgets go further ahead of heightened spending moments like Christmas,” the retailer said.
In October, Asda and Lidl announced similar price reductions.
Asda said it cut the cost of 956 everyday grocery products, including pantry staples such as pasta, cooking sauces, tea, and coffee, as well as prices on 49 products in its “Free From” range, “recognizing that customers with food allergies or intolerances often face higher costs,” the grocery company said.
“We understand the pressure families are under from rising living costs and we’re stepping up our support as we enter an expensive time of year for our customers,” Asda Chief Customer Officer Rachel Eyre said.
Similarly, Lidl GB announced a GBP 250 million (USD 335 million, EUR 287 million) investment in cutting prices on many everyday items. It has slashed prices on over 1,000 product lines since the start of this year.
“We’re committed to providing our customers with the best value every single day, and our teams work tirelessly throughout the year to deliver this for them,” Lidl GB Chief Commercial Officer Richard Bourns said. “We also firmly believe that everyone should have access to healthy affordable food, which is why we ensure that we’re offering the lowest prices in the market and it’s why we’re on a mission to bring new Lidl stores to more communities across the country.”
The grocery industry remains “incredibly competitive,” with the current price war, according to Murphy, and he expects that to continue in the latter half of this year.
Grocery inflation remained at 5.2 percent in August, staying the same as the level reached in July, which was the highest recorded rate in 18 months.
“Households are juggling a lot of different things when choosing what and where to buy their groceries. Inevitably, cost will be up toward the top of the list as price rises accelerate,” Worldpanel Head of Retail and Consumer Insights Fraser McKevitt said in a release.
