How Aldi and Lidl are set to benefit most from Brexit compared to other UK supermarkets

GERMAN discount like Aldi chains will thrive while traditional stores face higher costs as Britain looks set to exit the European Union.

A Lidl supermarket in Glasgow. Picture: Jeff J. Mitchell/Getty Images

BUDGET supermarkets Aldi and Lidl will benefit most from Brexit, analysts say.

Researchers say the German discounters are in line to do better in the short and medium term from Britain’s decision to leave the EU than the other major supermarkets in the UK, The Sun reports.

Analysts at Kantar Retail warn traditional British supermarkets will face higher costs in the wake of the referendum result, which sent sterling plunging to a 31-year low.

They say in a report: “The midterm effect of goods sourcing is likely to be the largest factor of consideration for British retailers.

“The prices of fresh produce will definitely go up as much of this is sourced from the EU. In the case of Tesco, for example, almost 50 per cent of butter and cheese consumed in the UK comes from milk sourced from EU markets.

“Inflationary pressures will further boost the call for locally-sourced/manufactured products as the retailers’ ability to source from the EU suppliers offering better trade terms is adversely impacted.

“Higher commodity prices and tariffs will also impact production of traditional products, even though a significant proportion of goods are produced locally. Supply chain costs are likely to go up due to higher trade tariffs.”

The German discounters are set to cash in on Brexit.

The report goes on: “There are several factors which will help discounters Aldi and Lidl absorb the rise in food prices and inflation — namely the limited range, having the leanest supply chains in retail and most importantly their economies of scale.

“Crucially, in their attempts to position themselves as genuine weekly shopping destinations, both Aldi and Lidl have drastically increased and improved their fresh offer, with sales from fruit and vegetables, meat, poultry and bread now accounting for 50 per cent of sales.

“In this time, they have been the most proactive in driving provenance and localism, with Aldi implementing a 100 per cent British fresh meat policy. This heightened relationship with British farmers means they are in a stronger position than their rivals in the immediate term.

“Lidl alone will invest £1.5 billion ($2.71 billion) over the next three years in building new stores, refurbishing existing ones and developing new product lines. These investment plans are likely to remain unchanged and, with the value of the pound dropping, the billions of euros set aside are now set to go a lot further.

“As a result, Aldi and Lidl are certainly primed to be the least affected retailers. Indeed they may be the ones to benefit in the short and medium term.”

This article originally appeared on The Sun and was reproduced with permission.