UK prices to rise as retailers pass on higher employment costs: BRC

BRITISH retailers will likely push up their prices in the coming months in response to higher employment costs in April, according to a survey on Tuesday (Mar 4) which showed a rebound in prices in February after the end of January sales.

The British Retail Consortium (BRC) said shop prices in February were 0.7 per cent lower than a year earlier – the same annual fall as in January.

But prices rose by 0.4 per cent in monthly terms in February following a 0.4 per cent fall in January – the biggest month-on-month increase in a year after a rise in food prices and an end to seasonal sales promotions for electrical goods and furniture.

BRC chief executive, Helen Dickinson, said shop prices will likely rise further as retailers face a £7 billion (S$12 billion) rise in annual costs this year due to a nearly 7 per cent rise in the minimum wage, packaging levies and an increase in payroll taxes announced in finance minister Rachel Reeves’ October budget.

The changes, which will come into effect on Apr 1, have raised questions about how far the higher costs for firms will feed into prices.

Britain’s headline rate of inflation hit a 10-month high of 3 per cent in January and the Bank of England forecasts it will reach 3.7 per cent in the third quarter of this year.

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The BRC said food inflation rose to 2.1 per cent last month, its highest rate since September last year when it stood at 2.3 per cent, reflecting higher prices for foodstuffs including butter, cheese, eggs, bread and cereals. Climbing global coffee prices looked set to push up prices next, it added.

“We expect food prices to be over 4 per cent up by the second half of the year,” Dickinson said. “If the government wants to keep inflation at bay, enable retailers to focus on growth, and help households, it must mitigate the swathe of costs facing the industry.”

Prices of non-food items fell by 2.1 per cent, a bigger annual drop than January’s 1.8 per cent decrease despite a 0.5 per cent rise in prices on the month. REUTERS