UK retailers see prices rise at fastest rate in a decade

Prices rose 1.8% month-on-month in UK shops, according to the British Retail Consortium’s (BRC) latest Shop Price Index.

February’s figure was the highest rate of price inflation recorded by the BRC since November 2011. The steep rise has been driven largely by increases in the costs of fresh food items, which rose 3.3% in February, up from 2.9% in January. Poor harvests, as well as increased transportation and energy costs are believed to be behind the record levels of inflation, according the BRC analysis.

The BRC’s Shop Price Index measures the monthly changes in the retail price of the 500 most commonly purchased items. Research was conducted by Nielsen, and the latest findings corroborate the 5.5% annual inflation rate announced last month by the ONS.

Helen Dickinson OBE, Chief Executive of the British Retail Consortium, said:

“Retail prices rose in February at their fastest rate in over a decade. Food inflation remained the key driver behind higher prices, particularly for fresh food which has been impacted by poor harvests, both in the UK and globally. Meanwhile, the increase from last month is a result of rising prices for non-food products, particularly health, beauty and furniture. There is little sign of change, with the Bank of England predicting price rises to continue until at least the Spring.

“Price rises will be unwelcome news for households who already face falling disposable income because of the rise in national insurance and energy price caps. Retailers continue to face cost pressures from higher shipping rates, with crude oil prices having almost doubled over the last year. Other pressures include labour shortages, commodity price increases, and rising energy prices. Retailers are going to great lengths to mitigate against these price rises and support their customers, for example, many supermarkets have expanded their value ranges for food. Unfortunately, there are limits to the costs that retailers can absorb.” 

Mike Watkins, Head of Retailer and Business Insight, at NielsenIQ which conducted research on behalf of the BRC, said:

“Inflation has increased since the start of the year and the underlying trend in shop prices will be upwards over the next few months. With falling disposable income for most households, retailers will need to keep encouraging customers to spend by offering choice and value and for some, discounts as well as added benefits for loyal shoppers.”