The pound has slumped against the dollar as Tesco and Unilever became locked in a pricing war sparked by the post-referendum slump in the value of the pound.
Multinational household goods giant Unilever has reportedly demanded a 10 per cent price rise in its products, including those made in the UK, to offset the higher cost of imported goods.
Sterling fell back to below $1.22, dropping by half a cent to $1.216 in early trading on Thursday.
This means sterling is close to a historic new low, on a ‘trade-weighted basis’, as global markets assess Britain’s prospects out of the EU.
Brexit secretary David Davis sent the pound dipping on Wednesday by hinting that Britain could well leave the single market, despite the serious implications for exporters and the financial services business.
Sterling is down 17 per cent since the EU referendum in June.
Officials cautioned ahead of the June referendum that a vote for Brexit would cause food prices to rise.
Connor Campbell, of SpreadEx, said the price row between Tesco and Unilever is a clear example of how Britain’s choice to leave the EU will affect the average person on the street.
He said: “Love it or hate it, Marmite has made an unlikely stir on the markets this Thursday as a battle between Tesco and Unilever sees the Brexit make its entrance into the supermarket price war.”
”It’s a sign that sterling’s current Brexit-drag is only going to put even more pressure on a supermarket sector already engaged in a margin-slashing price war, and is another tangible example of Britain’s choice to leave the EU affecting the average person on the street.”
Kathleen Brooks of City Index, argued the sight of Unilever’s products vanishing from the shelves of Britain’s largest retailer is “another tangible sign of the power of the weak pound” in a global economy.
Brooks said: “The Tesco/ Unilever battle is the latest fallout from Brexit, and since the pound dipped further overnight, back below 1.22 after a hawkish tone in the minutes from the Fed’s September meting, price wars are likely to heat up.
“The supermarkets are likely to try and resist price increases since most of them are trying to cut prices to attract consumers. However, this episode highlights how quickly weakness in the pound can effect us all in the pocket.”
Shares in both Tesco and Unilever were down about 2 per cent in early trading.
Other supermarkets have also taken a hit - with Sainsbury's down 1.7 per cent and Morrisons 1.2 per cent lower - reflecting investor nerves about cost pressures from the fall in the pound.
