I went to an Intelligence Squared debate on the motion "It is wrong to pay for sex" last night. One of the excellent speakers was Germaine Greer who made plenty of clever points. But one part of her argument was an attack on capitalism and, in almost an aside, she referred to the "grotesque profit margins" of the supermarkets.

I wondered, though, if she actually knew what the profit margins of our supermarkets are. Had she looked them up? And what would she - or I or you - consider to be "grotesque"? At a guess, a profit margin of 20% would be the minimum. Perhaps 30% or even 50%.

So this morning I decided to check exactly what is the profit margin of our biggest supermarket chain, Tesco's. For those who are not financially minded, the profit margin is the net pre-tax profit as a a percentage of the turnover (sales). In Tesco's latest accounts, the company had turnover of £47.3 billion. Its pre-tax profits were £2.8 billion. Its profit margin, therefore, was 5.9%.

Grotesque? I think not. The margin is certainly less than that of most corner shops. Supermarkets tend to have lower profit margins than most other retailers. They have high turnover of stock, they buy in bulk and so they are able to sell cheaply. They prices can be kept down because of the economies of scale. That is why customers go to them. They are one of the reasons that the price of food in Britain and in other advanced countries has fallen dramatically over the past century, thus ending the days when poor people went hungry.

I wouldn't call Germaine Greer's ignorance of capitalism and how it works "grotesque". It is commonplace. But I do think it regrettable that someone of her fame and influence does not bother to do any research before she makes assertions about company profits.

Posted by James Bartholomew • Indexed in Off the subject

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