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Friday, 20 September, 2002, 07:16 GMT 08:16 UK
'Rip-off' Britain investigated
Is "Rip-off Britain" alive and well? In the fourth part of our investigation, we have checked out whether UK shoppers are losing out compared with those in the US.

At the request of BBC News Online readers, we dispatched two reporters on both sides of the Atlantic to see whether the consumer rip-off is myth or reality.

And we want you to continue voting on how you think the inquiry should go forward - and we also want to hear your views on what our next step should be.

Our two reporters compared the price of a basket of goods ranging from everyday items such as coffee to bigger investments such as a digital camera.

The result: UK shoppers lose out to the tune of £120.17 ($186.78).

 The Great Shopping Divide
Big Mac meal £3.29 ($5.11) £3.34 ($5.19)
Levis 501 Jeans £39.99 ($62.13) £25.74 ($40)
Starbucks Tall filter coffee £1.45 ($2.25) £0.99($1.55)
Litre of Petrol £0.71($1.10) £0.28 ($0.45)
CD Album Pink 'Misundazstood' £12.99($20.18) £9.04 ($14.05)
Sony Digicam DS P-2 £379.89 ($590.33) £278.64($433)
Gap hooded fleece jacket £29.50($45.84) £30.88 ($48.00)
20 Dunhill cigarettes £4.46 ($6.93) £3.20($4.98)
Total price £472.28 ($733.91) £352.11 ($547.12)

Prices include local taxes

Our reporters asked retailers and market experts why UK consumers are losing out.

The BBC News Online basket of goods appears to show that consumers in the UK are getting a rough deal when compared to their US counterparts.

In some cases - coffee and a digital camera - one pound spent in the UK seems to be worth about one dollar spent across the pond.

However, are there legitimate reasons why shopping in the UK is more costly?

High UK business costs

When UK retailers are charged with profiteering, they cry foul.

Anita Borzyszkowska, spokeswoman for clothing retailer Gap - their hooded tops were actually cheaper in the UK - bemoans the costs of doing business in the UK.

"Retail premises are much more expensive, sales taxes and local authority rates are higher as well."

A US Starbucks coffee outlet
Starbucks coffee cheaper in the US

Profit figures of UK firms seem to support the idea that UK retail is squeezed - at least in parts. Despite buoyant High Street sales, many retailers have been returning only modest profit growth over the past year.

No comparison

And Hamish Thompson, spokesman of Dixons Store Group, argues that comparisons with the US are erroneous.

"A product may have been available in the US for longer, therefore it will be at a different stage of its life cycle and more likely to be sold at a discount," he told BBC News Online.

This may be true for digital cameras, but would not explain why long established goods such as Levis jeans are more expensive in the UK.

Consumers picking up tab

Andrew Beales, economist at the British Chamber of Commerce, believes UK consumers are indirectly picking up the tab for the poor state of the country's infrastructure.

"Transport costs in the UK are higher, every traffic jam or rail delay will eventually feed back into the prices paid by consumers."

All in all Mr Beales argues that drawing a parallel between the US and the UK is like comparing apples and pears.

"The US market is huge and business benefits from this - the labour market is more competitive and business costs are lower."

Instead he argues we should be looking to Europe for a legitimate comparison.

'Treasure Island'

However, UK consumers have long felt hard done by compared to their continental counterparts.

For many years the car industry referred to the UK as 'treasure island', as they were able to charge premiums for right-hand drive vehicles.

Two years ago, the government's Competition Commission called time on this practice, and UK car prices have started to come down.

More recently, Gap strongly denied claims from the Britain in Europe lobby group that it charged UK customers up to 40% more for certain clothes.

However, a quick check in Gap shops proves that some items, especially children's clothes, are indeed much dearer in the UK - it's plain obvious from the dual price tags showing both the euro and pound value.

And Ms Borzyszkowska admitted to BBC News Online that UK customers still pay on average 8% more than their French and German counterparts.

Whatever the reason - business profiteering, high retail rents or even the road network - it seems that if UK consumers want to buy a coffee or a digital camera at half price they will have to go to the States.

Some may think the disparity in prices for the same goods in the US and the UK is just a case of manufacturers or wholesalers being greedy.

But the real reasons for the UK's higher prices are more complex.

There are several contributing factors, not the least of which are higher tax rates imposed by the UK government - they are substantially higher than what any American pays.

For example, while New York City's sales tax is among the highest in the US, at 8.25% it is much lower than the Value-Added Tax (VAT) of 17.5% levied in the UK.

Efficiency boon

And there are other factors that result in generally cheaper prices in America. Key among them is cheaper land in suburban or greenbelt areas. Building on cheap land greatly reduces overhead costs for shop and factory owners.

The US market is also considerably larger and more efficient.

"US manufacturing has the highest productivity in the world, it's significantly higher than the UK," says Ian Shepherdson, chief US economist at High Frequency Economics, a markets analysis firm.

That means a product can be made far more cheaply in the US. It simply takes fewer man hours to make it, which translates into lower prices.

And UK consumers should bear in mind that steep price disparities even exist among US states.

State taxes

One example are cigarettes: A pack of 20 can sell for as much as $7.95 (£5.15) on the streets of New York City thanks to a recently imposed $1.50 (97p) per pack city tax.

But in Virginia, which enjoys the lowest state tax on cigarettes, 2.5 cents, packs sell for an average $3.20 (£2.07).

Also, not surprisingly, the price of goods can vary widely within a given city.

Net a bargain

When I sampled the prices for our shopping basket in New York, the price for pop-star Pink's CD "Misundaztood" ranged from $12.98 (£8.38) at to $19.99 (£12.91) at a suburban mall record store, a difference of 54%.

While internet outlets can sometimes undercut bricks-and-mortar retailers by a substantial amount, stores also battle it out among themselves.

US Wal-Mart supermarket
Wal-Mart's able to charge customers less

For example, an 18-ounce box of Kellogg's Corn Flakes costs $2 (£1.29) at Wal-Mart in New York state, while at supermarkets nearby the same box sold for $3.59 (£2.32).

Wal-Mart's efficient distribution system and huge purchasing power allow it to charge much less for the same products.

And not everything is cheaper in the US.

The Big Mac, one of the great symbols of US consumer culture, was actually cheaper in the UK.

What do you want us to do for the next step of the investigation into Rip-off Britain?

Vote now at the top right of this page and our reporters will follow your instructions.

After they report back on their progress, we will ask you to decide the next step.

And give us tips how you think the investigation should proceed:

Your Comments

I lived in the US for years, and the initial feeling that things were cheaper there is deceiving. A decent loaf of bread costs $3-4 in the US compared to 60p in the UK. A 'colonial' pint (16 fl oz) of decent beer costs $4 plus tip in the US compared to £2 in the UK. Bank accounts - free in the UK - tend to charge $10 a month for your account in the US. And electricity costs can be high too - I paid $60 per quarter compared to £15 now.
M Williams, UK

The comment in your 'justification' that goods may be in a different stage of their product lifecycle is clearly wrong for electronic goods. For any PC related item, you can normally reverse the exchange rate (i.e. pay less dollars than pounds), and due to the dynamic nature of this market products are launched pretty much simultaneously. Another good example is the recent launch of Playstation 2, which retailed for the same dollar price as pounds at launch. You also cannot claim that the UK infrastructure adds to delivery costs when you can send any product by truck or train from anywhere to anywhere in mainland UK in less than a day, but it takes four days to get from East Coast USA to West Coast. What about cars, where again you pay less dollars than pounds for a European built car?
Keith, UK

I bought a Fuji F601 digital camera for 619 Euros nearly 3 months ago. I was shocked to see the prices being charged in Britain for the same. 500 pounds at one well known retailer. It's the same for CD's and DVD's - everything (almost) is consistently cheaper here in Germany.
Al, Germany (ex-UK)

I think the survey is right. I have been to US in 2000 and I could make out the prices in US were lot cheaper than the prices in UK. If you go to a restaurant it will be much cheaper in US rather than UK. I think everything is much costlier here. My husband bought a car CD in Florida which was lot cheaper to the prices in UK.

The Only thing that is high in US is people salary index. Its very very high. Where as in UK, the salary index is very low and the cost of living is too high...
Bhavani Vejendla, United Kingdom

I'm glad someone is finally looking into this. I have just moved to the UK from the US (a year in November) and I'm astonished at the disparity between the US and the UK in terms of wages and price levels. In London where I live, I have to pay 4.55 pounds to get a shirt dry cleaned. In New York, people would laugh if you paid anything more USD 1.20 (that's around 75p)! Moreover, my neighbour just saved 8,000 pounds by purchasing his new BMW in Belgium -- and that's after being special ordered as a right-hand drive and upped to UK specs! It's shameful that the UK has fallen into this state. There's so much potential, but it's as if the country's locked itself into a perpetual standard of living that's far lower than in either the US or continental Europe.
Hakan Korkut, US citizen living in the UK

On such a limited choice of goods, differences can always be made to appear gigantic. It pays as ever to shop around, use the internet, don't go and buy from the first shop you see an item in, etc. The UK prices are certainly high, but they look like the max. cost rather than the best cost you could get by shopping around.
Matthew Illsley, England

Even within the EU the prices in Britain are generally quite a bit higher. Compare the prices between Britain and Germany for dairy Products, Soft Drinks and Alcoholic drinks across the board especially wine and you will see huge differences.
Adrian Kitson, Germany

I have several friends in the US and a while back I was thinking about trying to move over there to work, so I asked them how much cheaper it was to live. They said it wasn't. Although some things are cheaper, if you're living there, there quite a few things that are more expensive. The big one is insurance. All in all, they said the total cost of living out there was about the same as the UK.
Chris Adams, UK

For several years now I've found it's cheaper to buy DVD's online from both the US, Canada & Asia (and then pay have them imported) than it is to buy the equivalent disc in the UK. Not only that, but UK DVD releases usually appear several months after their US counterparts, and usually have fewer extras.
Dave, UK

We are part of Europe, part of the EU. Many British people have visited Europe or lived there for some time - I lived in Brussels for nearly a year - and you should be making a price comparison between the UK and a couple of mainland European countries.
Catherine McAulay, UK

Having lived and worked in the US I would have to say that in general prices are cheaper in the US. BUT they are catching up to us rapidly for most of the basic stuffs, gasoline excepted always. In any case how many digital cameras can you buy, nearly 100 pounds of the shopping basket saving example was attributed to the camera. Lets see a complete weekly supermarket shop and also a UK versus US comparison of day to day living costs e.g. utilities/transport etc... Jeans/cameras/CDs are all very well for vacation spending but you cant live on these items.
Paul, UK

I've spent a considerable amount of time in the US and when comparing various costs with my colleagues it is clear that the UK is considerably more expensive to live in than the US. It is also true that the UK is more expensive to live in than many mainland European countries. Don't be conned by the "Britain isn't really a rip off" campaign, probably instigated by the government and sanctioned by it's ministers of public enlightenment and propaganda (i.e. The Media) - the UK is without doubt a complete rip off. Higher cost, lower quality, poorer service, poorer environment. Proud to live here are you?
Simon Moore, UK

I have lived in the USA, UK and Germany. Manufactured goods are cheaper in the USA as your survey shows. Healthcare, car insurance, prescription drugs, dentistry, and getting your hair cut are all more expensive in the USA. Anything that requires qualified staff, or risks litigation tends to be expensive there. Germany has mostly cheaper goods and services than the UK, but housing and social security taxes are expensive here. Every country has its bargains and rip-offs.
Richard Hollinshead, British, living in Germany

Not only are prices cheaper across the pond, but I also believe the standard of living is higher too. Property is more affordable, cars are cheaper and salaries are higher. Why do you think so many nurses are leaving the UK?
Tom, UK

Earlier this year I bought a new iBook in the US. After I had added a memory card, I saved over $450 - nearly £350 - on the average European price. I realise I'm one of the lucky few who can afford to shop like this. But if prices in Europe are higher, this also reflects a totally different tax structure, and social philosophy. Remember, health care is free in the UK and France, while everybody has to pay for it in the US. I know where I'd rather be ill.
Sharkey, France

I think the figures in your survey may be even worse than they appear to be because the prices may represent a higher percentage of disposable income over here i.e. Americans may have a higher purchasing power so a $100 dollar item feels cheaper than it would to a Brit.
Roger Shilling, Scotland

The Big Mac comparison is not really fair, considering that in the they get free refills on drinks and I seem to remember larger portions as well.
Andrew, UK

House prices are cheaper in the US. US Employers expect 100% & are slave drivers. It is HELL in the US for those without health insurance and US credit card companies can suck one dry.
SallyAnn, UK

I visited New York last month and found pretty much everything I bought on an everyday basis to be cheaper than in the UK. As a result, my Visa card was battered into submission and I had trouble fitting all my purchases on the plane back home...
Phil Tromans, UK

Remember, there are still a few states with NO sales tax or VAT. I am fortunate enough to live in one of them. I am appalled by the prices of most goods in the UK. But Rip-Off Britain or not, my next holiday there will be No. 22!
Dennis, Oregon - USA

I lived in the US for 8 years and recently returned and my wife is American. I think its very important to compare like with like - Levis' will always be cheaper in the US, (as they are a US product), lets also compare the price of a pair of DM's in both countries. A 16oz pint of Bass in the US will about $4.50, while it'll £3 here for 20oz's. The most important comparison would be an average grocery basket...which is a lot cheaper in the UK. Overall the US can seem a lot cheaper, but as other correspondents have pointed out when you add in health insurance and other factors the cost of living the US escalates. As for petrol prices, lets not forget that many of us in Europe can still enjoy the luxury of NOT owning a car. Some thing that 98% of Americans couldn't do.
Nigel, UK

I have recently returned to Canada after living many years in the UK, as well as spending significant time in other European countries and the U.S. Every country has its own pricing quirks and much of it depends on the exchange rate. Now that the Euro has appreciated against the pound and the dollar, there seem to be fewer comparisons between the UK and Europe than there were a couple of years ago. If you want to do an accurate comparison, perhaps pick a typical shopping basket of goods, including groceries, which remarkably can be very reasonably priced in the UK. At the end of the day though, it's more your purchasing power than the actual price of goods. That's the true comparison.
Peter, Canada

I moved to the US 18 months ago after 33 years in Britain - Don't believe the hype! Day to day living is just as expensive as in the UK, in some cases more so. Don't base your assumptions on a holiday or business visit - once you've lived here for a while you'll realise just how expensive it can be. Once you've paid for the day-to-day stuff, you're lucky if there's enough left for the bargain luxury items!
Keith Aitken, USA

Why do we care if the US is more expensive? Its 3,000 miles away, so relative purchasing power comparisons with the US are of less interest than comparisons with EU countries, where with an alleged free market we should be looking to as an alternative to source our goods. We are in the EU but we are not the 51st state. If we joined NAFTA it would be a worthwhile conversation but as we haven't, its all hot air
Kieran, UK

he biggest problem is that UK prices are skewed by 17.5% VAT. US average is around 5% state sales tax. Even Canada with 15% is less expensive. In terms of cost of goods $1cdn=$1us=£1uk especially for consumer items such as DVD/CD and electronics.
Iain Barker, USA (UK national)

You should include the price of a doctor's visit. Perhaps that would even things up a bit.
Gary, Japan

American is the land of opportunity. If you make the most of all the opportunities here, you will live much cheaper than in Britain. I have lived here for more than five years, and have a higher standard of living now than at any time when I lived in the UK. When stores here have sales, they often take 50 - 80% off. We make the most of these opportunities, and will buy a year¿s supply of every-day items. Many banks now offer free banking; so more savings can be made there. Salaries are higher and all taxation is lower. Go back to Rip-off Britain? Never.
Steve Stirrup, USA

Choose our next step

Can shoppers beat high prices

Will ministers end the rip-off

Can the EU stop unfair deals

2146 Votes Cast

Results are indicative and may not reflect public opinion

See also:

10 Sep 02 | Politics
03 Sep 02 | Politics
18 Apr 00 | Business
19 Sep 02 | Business
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