Food prices are projected to rise by 4.2 percent in the latter half of the year, amid pressures brought on by Budget measures, the retail industry has warned.
The shop price inflation data, released by the British Retail Consortium (BRC) on Thursday, showed lower prices in December. Compared with the same period last year, shop prices overall were 1 percent lower last month, a deepening of November’s 0.6 percent deflation.
Shop price annual growth remained at its lowest rate since August 2021. This, however, was influenced by the Black Friday discounting period.
“Retailers discounted heavily for Black Friday this year as they attempted to make up for weaker sales earlier in the year. However, the later Black Friday timing brought many of the non-food discounts into the measurement period, making non-food prices look more deflationary than the underlying trend,” said the BRC Chief Executive Helen Dickinson.
She added that with food inflation unchanged at 1.8 percent in December and upcoming price pressures on the industry, shop price deflation “is likely to become a thing of the past.”
Operating on Slim Margins
Dickinson has urged the government to mitigate price pressures and ensure that reforms to business rates don’t result in higher bills for businesses.This will be funded by higher taxes on properties with a rateable value of £500,000 and above, including large distribution warehouses, often operated by supermarkets and retails firms.
Chancellor Rachel Reeves also said the plastic packaging tax will rise from £217.85 to £223.69 from April 2025.
The BRC has previously asked the government to reconsider the timelines for the packaging levy and ensure the business rates tax policy offers “a meaningful reduction for all retailers as early as possible.”
Higher Prices for Shoppers
The head of Retailer and Business Insight at NielsenIQ, Mike Watkins, said that in December shoppers benefited from lower inflation than last year, but added that “higher household costs are unlikely to dissipate anytime soon.”He urged retailers to “carefully manage any inflationary pressure in the months ahead.”
A growing number of British firms expect sales growth to slow and prices to rise in the new financial year as a result of Budget measures.
Bakery chain Greggs has said it is facing a bigger expenses bill this year from measures including higher wages for staff.
Greggs Chief Executive Roisin Currie said the company had to “pass a minimum amount of price rises onto customers.”
In October, Sainsbury’s and Asda bosses said that a “barrage of costs” coming from tax hikes will translate into higher prices for consumers.