Prices in UK shops fell at their fastest pace in more than three years this month, but retailers warned that this week’s budget could spur inflation, the British Retail Consortium (BRC) said on Tuesday.
Retailers issued the caution ahead of the UK budget announcement by finance minister Rachel Reeves, expected on Wednesday 30 October.
Annual shop price deflation dropped to 0.8% in the 12 months to October, the BRC said, its weakest since August 2021 and a bigger fall since September’s 0.6% decline.
It was the eighth time in nine months that the pace of growth has weakened.
Food prices rose by 1.9% but non-food deflation held at 2.1%.
Clothing prices rose slightly for the first time since January as retailers unwound some of their heavy discounting.
The chief executive of BRC Helen Dickinson commented on the change, saying, “Households will welcome the continued easing of price inflation.
“But this downward trajectory is vulnerable to ongoing geopolitical tensions, the impact of climate change on food supplies, and costs from planned and trailed government regulation.”
'More Than Its Fair Share'
Reeves is expected to include in her first budget on Wednesday an increase in social security contributions that businesses must pay for their staff.
This has caused unease among some employers who are also nervous about labour market reforms to give more protections to workers.
Dickinson said, “Retail is already paying more than its fair share of taxes compared to other industries.”
She subsequently called on Reeves to reduce the business rates tax paid by retailers.
Official figures showed consumer price inflation fell to 1.9% in September, well below the 41-year high of 11.1% it touched in October 2022.
Experts expect the Bank of England to cut borrowing costs in November for only the second time in four years.
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