The Chancellor has been warned that the “dam is starting to break” on surging shop price inflation, which retailers had kept at bay with heavy discounting.
Shop prices rose by 2.1 per cent in the year to October, according to new data from the British Retail Consortium, ahead of September’s 1.4 per cent and the three-month average of 1.6 per cent.
Retailers have said the long-feared spike in inflation caused by the Iran war’s knock-on effects on energy and supply costs is beginning to take hold.
Rising prices of long-life goods are behind this uplift. Fresh food inflation remained steady at 2.6 per cent, while overall food prices rose 2.9 per cent in the year to October, up from 2.5 per cent the previous month.
Price inflation among non-food goods almost doubled, from 0.8 per cent in September to 1.7 per cent in the year to this month.
Shortly following the US and Israel’s first strikes on Iran, food industry experts warned that the effective closure of the Strait of Hormuz would cause food prices in the UK to surge, as they did following Russia’s invasion of Ukraine.
The Food and Drink Federation (FDF) had tipped food inflation to surge by as much as 10 per cent by the end of this year, but later adjusted its forecast to eye up a peak of 6.4 per cent by next summer.
Chancellor urged to slash costs on retailers
Food inflation has remained steady at 1.3 per cent in recent months, prompting bosses at top supermarkets, including Sainsbury’s and Tesco, to question whether these cost increases would pass through.
Mike Watkins, head of retailer insight at data firm NIQ, said retailers had managed to delay some of the impact of these price rises by working hard to discount products.
“High street retailers, faced with consumers becoming more cautious in the face of higher energy and fuel costs, will now be more reliant on promotions to drive discretionary non-food spend,” he said.
Helen Dickinson, the BRC’s chief executive, said: “The dam is starting to break on the huge wave of costs retailers have absorbed over the last two years.
“The message to the Chancellor ahead of tomorrow’s Budget could not be clearer: act now or prices will keep on rising. Without a change of course, October’s jump in inflation is only the beginning.”
The trade body has urged Chancellor John Healey to follow a “simple recipe” to halt food inflation, including cancelling hikes to business rates, slashing the cost of employment, and ditching costly packaging taxes.