Inflation in UK shops hits record despite broader easing
PRICES in UK stores rose at their highest rate since at least 2005 in January, with retailers offering fewer discounts than during the festive period.
The British Retail Consortium (BRC) said shop price inflation accelerated to 8 per cent, a record for an index that started in 2005, and an increase from 7.3 per cent in December. Food price increases hit 13.8 per cent, with sugar, alcohol and fruit and vegetables all particularly affected.
Prices are steadily rising for consumers even as broader measures of inflation start to ease in the UK. Shoppers spent more than expected over Christmas as they organised family gatherings without Covid restrictions, but rising inflation meant that they got less for their money.
“Prices are yet to peak and will likely remain high in the near term,” said Helen Dickinson, chief executive officer at the BRC. “Retailers still face ongoing headwinds from rising energy bills and labour shortages.”
Higher food prices mean consumers have less to spend on non-essential items. The UK’s antitrust regulator has started a review into the pricing of groceries.
Costlier food has also meant that consumers are increasingly visiting non-food budget retailers. Almost a fifth of parents are buying groceries from stores like Poundland and B&M European Value Retail, according to research from Red Tractor, a food standards group, and YouGov.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
There are also signs that buoyant retail sales over Christmas were largely thanks to consumers taking on more debt. That’s left shoppers facing elevated credit card bills at the start of the year.
“Consumer demand is likely to be weak in the first quarter due to the impact of energy price increases and for many, Christmas spending bills starting to arrive,” said Mike Watkins, head of retailer and business insight at NielsenIQ.
Many retailers have kept their profit outlooks unchanged despite a rise in sales at Christmas, as they remain wary of how rising prices will weigh on shoppers.
In a sign of the strain retailers are under, Tesco and Asda both recently announced job cuts. Supermarkets’ margins are under pressure as they try to keep prices down to protect their market share. BLOOMBERG
Share with us your feedback on BT's products and services
