When both the Bank of England governor Andrew Bailey and prime minister Boris Johnson said recently that workers shouldn’t ask for pay rises because it may set off an inflationary spiral, they got one thing right.
Inflation is indeed spiralling, but it is not workers who are driving it. Rather, the spiral is being fuelled by companies that are using the cost of living crisis as a smokescreen to raise prices and further increase already massive profits.
This was the conclusion drawn by a ground-breaking new report by Unite into corporate profiteering, which is now running rampant. The report, Unite Investigates: Corporate Profiteering and the Cost of Living Crisis, reveals the inextricable link between people’s plummeting living standards and companies’ ballooning profits.
Among the report’s key findings is an analysis of the UK’s biggest listed companies in the FTSE 350, whose profit margins are an astonishing 73 per cent higher than pre-pandemic levels in 2019. Even after removing energy companies – whose staggering profits have been widely reported –from the analysis, profit margins of the remaining companies are still up by 52 per cent.
“The weight of evidence shows that the UK is in the grip of a profiteering crisis,” explained Unite general secretary Sharon Graham. “Workers’ wages and what they can buy, are being squeezed by corporate wreckers pursuing runaway profits, quite literally at our expense.”
Indeed, while it is widely accepted that high inflation was initially sparked by supply chain shocks driven by the pandemic, increasing energy demand and the war in Ukraine, Unite has uncovered evidence of a ‘second wave’ of inflation.
This, the report found, is being driven by companies relentlessly raising prices over and above what’s needed to cover rising costs, also known as ‘price gouging’.
In a wider examination of the overall economy, Unite’s report found that, looking at data from the Office for National Statistics (ONS) across all companies, profits were up by more than 8 per cent in the six months from October 2021 to March 2022 after accounting for inflation. Over the same time period, real terms labour costs fell by 0.8 per cent.
Unite’s research found that this jump in UK-wide company profits is responsible for nearly 60 per cent of inflation in the last half year – as opposed to just over 8 per cent due to labour costs.
‘Whole swathes’ of corporate Britain driving inflation
Even companies themselves have publicly noted that price gouging is becoming standard practice. In April, supermarket giant Sainsbury’s reported a record £730m in profits. Although chief executive Simon Roberts denied his own supermarket chain was price gouging, he said that the company’s competitors were guilty of it when he noted, “We are inflating behind the market, our direct competitors are inflating ahead of the market.”
The Bank of England, too, has highlighted the impact of price gouging on the cost of living crisis, albeit quietly and euphemistically. In a recent speech to Chartered Accountants, the Bank of England’s chief economist Huw Pill spoke of companies pushing up prices to ‘pass on costs’, adding that a ‘further strengthening of [profit] margins is likely’.
In its report, Unite emphasised that profiteering isn’t just about oil companies or a ‘few bad apples’. Because of the way that supply chains are so tightly interwoven, when companies price gouge, businesses within the supply chain follow suit. This is what can spark successive waves of inflation as profiteering becomes entrenched.
“The Governor of the Bank of England and Boris Johnson want workers to think it’s irresponsible to demand better wages to pay for crippling food and energy prices,” Unite’s leader Sharon Graham noted. “But Unite’s report exposes the truth. It’s not hard pressed workers who are driving inflation, it’s whole swathes of corporate Britain.”
Yet another truth exposed by Unite’s report is that as companies’ profit margins catapult to ever new highs, so too does executive pay. Between 2020 and 2021 average pay for the highest paid directors of the UK’s biggest listed companies leapt a colossal 29 per cent from £2.01 million in 2020 to £2.59 million in 2021.
“It’s not just energy companies,” Graham said. “There are businesses right across our economy and their directors who have made vast sums of money from Covid-19 and the inflationary pressures that have followed.
“Those who have profited from the crisis should pay for it. Unite makes absolutely no apologies for demanding better pay for our members. Wage restraint? It’s time to demand profit restraint.”
‘Asking the right questions’
Unite’s profiteering report, which was published today (June 17) has received widespread acclaim, with accounting professor and member of the House of Lords Prem Sikka commenting, “This report focuses upon corporate profiteering, the resulting hardship and the government’s failure to tackle it. Profits for the few are the source of crisis for many. This investigation could not be more timely.”
Meanwhile, Guardian columnist Aditya Chakrabortty, who interviewed Unite general secretary Sharon Graham about the profiteering report, noted in his column, “For my money, [Graham] is asking the right questions about capitalism and correctly focusing her energies outside an increasingly tepid Westminster.”
Chakrabortty’s column received thousands of positive comments from readers, with one reader commenting, “Sharon Graham is doing the job that politicians of whatever stripe, have declined to do for years, and that is ‘ speaking truth to capitalists’.”
Another reader commented, “Well done to Sharon Graham at Unite for her union’s focus on researching forensically the activities of employers and putting the spotlight on them.”
“So refreshing and optimistic to see this practical approach to getting better pay and conditions for workers,” said another.
Indeed, Unite is leading the way in the fight against profiteering by demanding – and winning – substantial pay rises for its members. You can read about Unite’s latest wins here.
And if you want to find out more about Unite’s bold new strategies, join us at the TUC’s cost of living march tomorrow (Saturday, June 18), where Unite general secretary Sharon Graham will speak and march alongside her members.
By Hajera Blagg