Aberdeen businessman James Bream feels there is a genuine debate to be had about excessive corporate profits.
But he also feels that those making excessive profits are generally larger businesses - not SMEs.
Mr Bream, CEO of Aberdeen-based Katoni Engineering and chairman of Developing the Young Workforce North East, was reacting to recent comments from Bank of England boss Andrew Bailey.
The governor warned firms that raising prices will risk allowing high inflation to persist, hurting the "least well off".
"If all prices try to beat inflation, we will get higher inflation," added the governor.
He warned interest rates would rise again if prices continued to increase. Mr Bailey was speaking after the Bank raised the interest rate by 0.25% to 4.25% - the highest level for 14 years after prices jumped unexpectedly last month.
Inference
Mr Bream said the inference was that companies are raising prices above what is required to maintain normal profits.
He continued: “Normal profits is an economic outcome where prices meet a set of conditions relating to appropriate competition and information being shared in a market.
“By inference, Mr Bailey appears to think companies are raising prices to make supernormal profits.
“One basic requirement of efficient markets is that competition exists. With competition, if companies raise prices excessively, people or businesses would simply buy from a company who hadn’t done that. So potentially Mr Bailey was inferring that competition/markets are not working in the UK.”
But Mr Bream also pointed out that the main driver of the unexpected rise in inflation was food prices.
He added: “It strikes me that there is plenty of competition in the consumer food sector, whether we look at eating-out, retailers, wholesalers or other areas.
Comments
“With that being the case, the comments appear ill-placed and insensitive. I’d suggest most businesses are simply trying to survive and, particularly small businesses, are impacted by a range of input price increases not only related to raw materials and also the cost of increased borrowing.
“Now, being a little bit kinder to the governor, there is a genuine debate to be had about excessive corporate profits.
“However, I would suggest these are generally larger businesses -not SMEs.When a small business sets a price, they are often simply pricing to cover their costs and survive - i.e. they are securing normal profits.”
Russell Borthwick, chief executive of Aberdeen & Grampian Chamber of Commerce, also had some thoughts to share with the governor.
He said today: “Firms will have to keep putting up prices if you keep increasing their cost of borrowing, Mr Bailey.
“And that is on top of energy-cost increases, wage inflation and rising raw-material prices.
“Why is it ok for you to suggest that companies simply trying to cover these increases are causing inflation and should desist? Chicken and egg, governor.”