The consequences of the COVID-19 pandemic have brought about many “new normals,” not least hybrid work and rising prices. There is growing opinion that the latter may not be entirely due to external factors.
A study of 17,000 UK companies by the United Alliance found that their profit margins had increased by an average of 30% in the post-COVID period compared with 2018-2019.
Alleged price gouging is rampant across industries, from supermarkets to energy companies and even private equity-backed veterinary chains. Overall, 60% (or 9,651) of the companies analyzed have seen their profit margins increase in the post-COVID-19 period.
This is happening at a time when real wages have fallen for workers who are dealing with historic cost-of-living pressures, particularly on necessities like food and heating.
Unite said the study, the largest analysis of company profits since the start of the COVID-19 pandemic, said profiteering among British companies had become systemic.
“For the past two years Unite has been denouncing the profiteers who have contributed to the cost of living crisis,” the union wrote. “While workers have suffered the biggest fall in real wages and living standards for generations, businesses have received thousands Billions of dollars in profits.”
COVID-19 Profits
The global economy has experienced a prolonged period of turmoil since the outbreak of the COVID-19 pandemic.
Unprecedented government stimulus has found its way into workers’ wallets and corporate coffers to help them cope with the impact of lockdowns, creating huge inflationary pressures.
At the same time, supply chains are thrown into disarray as a result of these lockdowns, distorting the supply and demand dynamics of the global economy.
To make matters worse, Vladimir Putin’s invasion of Ukraine and subsequent tariffs on Russia caused energy prices to rise while cutting off vital food inputs such as grains.
Together, these factors have caused waves of inflation over the past few years, with inflation peaking at 11.1% in the UK and 10.6% in the euro zone. However, they also provide a reason for companies to raise prices faster than costs.
Unite’s findings are consistent with previous research on big business profit margins, which suggests that they do not absorb the higher costs of supply shocks but instead pass the costs on to consumers.
A global study of 1,350 companies, including the likes of Shell, Exxon Mobil and Kraft Heinz, found profits grew 30% between 2019 and 2022.
Analysis by the British Institute for Public Policy Research (IPPR) and Common Wealth also found that in the UK, 90% of profit growth came from 11% of listed companies.
Overall, the companies surveyed by the think tank were those best positioned to take advantage of rising prices, particularly in the energy and retail sectors.
Analysts warn that overtly benefiting from the widespread cost-of-living crisis could be deeply unpopular and even jeopardize a company’s social license to operate.
Last April, with inflation still out of control, Société Générale economist Albert Edwards lamented corporate greed in a report that he described as Something never seen in forty years in the financial industry.
“The end of greedy inflation must come. Otherwise, we may see the end of capitalism.
“This is a huge issue for policymakers that can no longer be ignored.”
Western central banks have been trying to rein in inflation in recent months. Prices in the Eurozone rose by 2.4% in March, close to the 2% target. The situation is proving more stubborn in the UK and US, where consumer price inflation remains above 3%.
But that hasn’t stopped workers across Europe from striking, demanding higher wages to keep up with rising prices over the past two years.
As companies’ profit margins improve – and in the UK at least, they take the opportunity to offer increasingly controversial pay rises to bosses – management may find it difficult to convince striking workers that they cannot meet these demands.
