Shoppers will 'inevitably' face higher prices as retailers pass on extra Budget costs, warns top industry body
Shoppers will “inevitably” face higher prices as a consequence of the Budget, the boss of the British Retail Consortium has warned.
Helen Dickinson, chief executive of the BRC, said there are “significant price pressures on the horizon” for retailers.
It comes as the BRC’s latest Shop Price Index showed prices have dropped 0.6 per cent in November compared to the same point last year. But the fall is lower than the 0.8 per cent recorded in October and the BRC has warned that this month may be the last one to see falling inflation.
Ms Dickinson said there are several factors at play in the latest figures.
“November was the first time in 17 months that shop price inflation has been higher than the previous month, albeit remaining overall in negative territory,” she said.
"Food prices increased for fresh products such as seafood, which is more vulnerable to high import and processing costs, especially during winter.
"Tea prices also remained high as poor harvests in key producing regions continued to impact supply.
"While coffee prices experienced a momentary dip, price rises are imminent as global coffee prices approach record highs.
"In non-food, while many retailers unwound some of their discounting, there are still many bargains across fashion and furniture. Customers looking to upgrade their electricals were able to pick up some great deals in early Black Friday sales.”
She added that the Government should rethink the planned introduction of a new levy, called the extended producer responsibility, which is due to come into effect from next year. It has led to warnings from businesses it could push up the price of items like kettles, toasters, soft drinks and bottles of beer. The BRC also wants to see business rates reform prioritised.
Ms Dickinson said: “With significant price pressures on the horizon, November’s figures may signal the end of falling inflation.
"The industry faces £7 billion of additional costs in 2025 because of changes to Employers’ National Insurance Contributions, business rates, an increase to the minimum wage and a new packaging levy.
"Retail already operates on slim margins, so these new costs will inevitably lead to higher prices.
"If the government wants to prevent this, it must reconsider the existing timelines for the new packaging levy, while ensuring any changes to business rates offer a meaningful reduction for all retailers as early as possible.”
Food prices are still rising, with food inflation up 1.8 per cent in November, down from 1.9 per cent in October.
The BRC said that the annual rate continues to ease in this category and inflation remained at its lowest rate since November 2021.
But fresh food inflation accelerated this month to 1.2 per cent, up from one per cent in October.
Non-Food remained in deflation at -1.8 per cent in November, up from -2.1 per cent in the preceding month. Mike Watkins, Head of Retailer and Business Insight, NielsenIQ, said there are some positive signs as the vital Christmas shopping period gets into full swing.
He said: “Shoppers are still being cautious by shopping savvy for the essentials and holding back their discretionary spend, so the lower level of inflation should help sentiment ahead of Black Friday promotions.
"And with lower inflation than this time last year, many food retailers are extending offers and discounts to help sales momentum in December.”