Brexit hits supermarkets for first time as pound slump sparks Tesco-Unilever row

The war between Tesco and Unilever is making the pound worth even less

Tesco has refused to pass on the price hike caused by the falling value of the pound (Getty)

The pound has slumped against the dollar on Thursday as the first financial implications of the UK's vote to leave the EU sparked a price row between Tesco and its supplier Unilever.

Multinational household goods giant Unilever has reportedly demanded a 10 per cent price rise in Tesco products, including those made in the UK, to offset the higher cost of imported goods.

The dispute means popular products such as Marmite and PG Tips tea bags will no longer be available via Tesco's website, the country's biggest online retailer.

The row has rattled the pound, which enjoyed a slight bounce on Wednesday, sending it down below $1.22, on Thursday.

Sterling was trading at $1.216 in early trading, down 17 per cent since the EU referendum in June.

It recovered some of it losses ty 4.30 pm hovering around the $1.22 mark.

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.

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 were down 2.9 per cent by market closing time.

While Unilever shares were down 3.5 per cent.

Other supermarkets have also taken a hit in early trading - 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.