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The slow decline of Morrisons supermarket chain is something of a metaphor for Britain’s wider decline. Beginning as William Morrison’s butter and egg stall in Bradford at the end of the nineteenth century, the business slowly expanded to a chain of market stalls and small shops during the inter-war years. But the business saw greater growth in the 1950s when William Morrison’s son Ken took over. The first minimarket opened in Bradford in 1961, with the company listed on the London stock exchange from 1967.
Key to the company’s success was the ‘vertical integration’ of its supply chains, the company owning farms, slaughterhouses, butcheries, bakeries and food processing plants, with new acquisitions bought as the supermarket chain expanded across the north of England. By the late 1990s, Morrison’s was the number one supermarket in the north, but largely absent in the south. This changed in 2004 with the takeover of Safeway – propelling Morrisons into the top four UK supermarkets (alongside Tesco, Sainsbury’s and Asda).
Morrisons though, had an Achilles heel in the shape of its leader. In 2008, Ken Morrison retired, and the chain ceased being a family business. Initially new leadership resulted in a degree of innovation, with the growth of Morrisons online presence and partnerships with Amazon and Ocado to provide delivery services. The company, however, was vulnerable to hostile takeovers and bidding wars as the new breed of vulture (sorry, venture) capitalists began hoovering up assets in the post-2008 low-interest rate environment.
In 2021, in a deal that in any sane world would have been illegal, US firm Clayton, Dubilier and Rice ‘bought’ Morrisons for £7bn, the leveraged buyout cost borrowed against Morrisons assets, leaving the company with crippling debts just at the point that interest rates were rising in the new, post-lockdown environment.
The company has struggled to pay down debt ever since, reporting multi-million-pound losses, with interest payments alone taking nearly half of the company’s £835 million 2025 income. In an attempt to manage this predicament, the company has aggressively ‘de-levered’ by selling off its vertically-integrated supply chain – effectively destroying the thing that made the company unique in the first place. And as just another supermarket, footfall and income have fallen, with Aldi taking Morrison’s fourth place, and Lidl likely to push it into sixth place in the coming months.
If Morrisons was the only supermarket facing decline, this would be just another example of the perils of leveraged buyouts – the collapse of Manchester United football club being perhaps the most famous – and a real life rebuttal of the neoliberal belief that ‘free markets’ are always best. But the UK’s supermarkets have been quietly suffering in the 2020s. As analysts Savills report:
“… the continued positive growth in sales across the UK grocery market does somewhat belie the difficulties the market is facing in the current economic climate. Since July last year, we have seen double-digit price growth on food and non-alcoholic beverages, far outstripping the price growth for all consumer goods and services, which itself rose at the fastest rate in four decades in 2022.
“Consequently, volumes have slumped as consumers have cut back in order to mitigate the rise in prices they are seeing at the supermarket.”
At this point, all of the big UK supermarkets are reporting declining profits as consumers are forced to restructure their spending as the cost of essentials spirals upward at a greater rate than official inflation. This despite ongoing use of ‘shrinkflation’ (smaller packages or less goods in the old packages) and ‘enshitification’ (the use of inferior ingredients) in an attempt to keep headline prices down. And further hits are landing as higher National Insurance and Minimum Wage costs eat into profit margins across the whole supply chain.
Among farmers, it used to be said that the only thing worse than a contract with Tesco (the UK’s leading supermarket) was not having a contract with Tesco. That is, the conditions were onerous and the return percentages low. But at least with Tesco, a farm had a guaranteed and steady income. Those without a supermarket contract were blown on the winds of local wholesale markets. And this situation is key to the supermarkets’ socialised operating model.
The original pitch from the first out of town supermarkets was a convenience compared to the high street. Shoppers could drive and enjoy free parking and purchase everything they needed from one outlet – a massive convenience compared to expensive parking or public transport to and from town centres where shoppers had to lug bags from one shop to another. Crucially, as the supermarkets’ customer base grew, they could leverage this massive potential purchasing power to browbeat their suppliers into accepting lower (percentage) returns… and for the past four decades it worked.
But the model – like so much else in our way of life – assumes permanent growth… particularly when supermarkets take on (or in Morrisons case, are forced to take on) massive debt. Without growing sales, the interest payments become unrepayable, leading to catabolic asset sales. And when there are no more assets left to flog, the insolvency practitioners are waiting in the wings.
This was already a slow-motion train wreck before the Trump administration embarked on Operation Epic Clusterfuck – the plan to defeat the USA by raising oil prices above $200-per-barrel. But with an inevitable energy shock now built in (the only questions are how big? And for how long?) and with less obvious and longer term shortages on the way (apparently 33% of the world’s helium – essential in silicon chip manufacture – is transported through the Strait of Hormuz). As I explained in my most recent book, Breakdown, this kind of energy price spike has preceded every major economic crash in the history of industrial civilisation – and this time around, there is no pristine source of energy waiting in the wings to save us.
Which brings us back to the supermarkets, since, having helped destroy high street retail, they are now effectively essential life-support for millions of people. And since their business model depends upon our collective purchasing power, some, at least, of them are bound to fail as the coming energy shock removes almost all of the discretionary purchasing power from the bottom 80 percent of the population. Not least because internally, the supermarkets depend upon discretionary spending (ready meals, sweets, ice cream, etc.) to subsidise the cost of essential foods.
Moreover, the loss of consumer spending power is just one jaw of the vice currently squeezing the supermarkets. On the other side are the increasing overhead costs faced by suppliers. With fertiliser (produced from gas) costs spiralling upward, for example, farmers face a choice between higher costs or lower yields… and both will negatively impact supermarkets either through higher payments to suppliers or greater competition (and higher prices) for non-contracted supplies.
The most likely short-term consequence – particularly if the Strait of Hormuz remains closed for several months – is the bankruptcy of the two middling supermarkets (Asda – 12% of the market – and Morrisons – 8.4%) as they are eclipsed by the discounters (Aldi 11% and Lidl 8.2%) with those of their stores in good locations shared out between the remaining supermarkets. And this will be disastrous for those parts of ex-industrial, rundown seaside and smalltown Britain where supermarket retailing is no longer seen as profitable.
Longer-term, of course, as spending power collapses in all but the top-end luxury sectors, supermarkets and their suppliers face the unenviable task of adapting to a world in which shortages and high prices are the norm, and in which the leverage enjoyed by socialising consumer spending power no longer exists. Those of us who grew up in the days before supermarkets can remember those famous first words asked of any shopkeeper… “what do you have in?” Soon enough, younger generations may find themselves having to ask the same question.
As you made it to the end…
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