Prices in British shops fell a bit less sharply in January than in December and food costs rose at the fastest monthly pace since April last year, according to a survey published today (28).
The British Retail Consortium (BRC) has warned of the risk of further price pressure ahead as the sector copes with increased costs including from finance minister Rachel Reeves' decision to add to employers' tax burden in her October budget.
According to BRC data, shop price deflation was 0.7 per cent in January, above deflation of 1.0 per cent in the previous month. This is slightly above the 3-month average rate of -0.8 per cent.
Food inflation eased to 1.6 per cent in January, down from 1.8 per cent in the month preceding. This is below the 3-month average rate of 1.8 per cent. The annual rate has eased considerably since the start of 2024.
Fresh Food inflation slowed in January, at 0.9 per cent, down from 1.2 per cent in December 2024. Ambient Food inflation also edged down to 2.5 per cent in January, from 2.8 per cent in December.
Helen Dickinson, Chief Executive of the BRC, said, “While overall prices fell in January, the pace of shop price deflation eased. Extensive January sales was good news for bargain hunters, with non-food products showing significant discounts, particularly for furniture and fashion, but less good news for retailers needing to shift excess stock.
"This month’s figures also showed early signs of what is to come, with month on month food prices rising at their fastest pace since April last year. Ambient food saw a 1 per cent jump as prices spiked for sugary products, chocolates and alcohol.
“Price cuts and deflation may not last much longer as retailers will soon feel the full impact of £7bn of new costs announced at the last Budget.
"Higher employer NICs, increased National Living Wage, and a new packaging levy mean that prices are expected to rise across the board.
"Government can help to mitigate the impact on consumers by ensuring its proposed reforms to business rates do not result in any store paying more in rates than they already do. Without action, UK households will feel the effects.”
Mike Watkins, Head of Retailer and Business Insight, NielsenIQ, said, “Shoppers continue to be unsure about spending and many are seeing a continued squeeze on their household incomes.
"So we expect non-food retailers to still promote and food retailers to still offer price cuts over the next few weeks, with shoppers managing their budgets by shopping smart and shopping around for wherever the savings are the most attractive.”
