Prices in British shops fell less sharply in January than in December and food costs rose at the fastest monthly pace since April last year, according to a survey published on Tuesday.
The British Retail Consortium (BRC) warned of the risk of further price pressure ahead as the sector copes with increased costs, including from finance minister Rachel Reeves’ decision to add to employers’ tax burden in her October budget.
Annual shop price deflation of 0.7% this month was less than in December when prices were down by 1.0% – the sharpest drop in more than three years, the BRC said.
Food prices were up by a monthly 0.5% in January – a stronger rise than December’s 0.1% increase.
Overall prices fell by 0.4% between December and January.
'Early Signs Of What's To Come'
Helen Dickinson, chief executive of the BRC, said extensive discounting by retailers in January was particularly significant in furniture and fashion.
Dickinson said, “This month’s figures also showed early signs of what is to come, with month on month food prices rising at their fastest pace since April last year.”
Retailer might have to push up prices in response to the higher social security contribution requirements announced by Reeves along with an increase in the minimum wage and new packaging levy, she said.
“Without action, UK households will feel the effects,” Dickinson said.
She also called on the government to offset the increase in costs for the sector by ensuring retailers do not have to pay more property taxes.
Britain’s headline rate of inflation fell to 2.5% in December but economists expect it to rise again, with some forecasting that it will hit 3% in data for January.
British retailers’ have reported mixed results on Christmas trading.
Tesco – the UK’s biggest supermarket group – reported strong festive trading.
However, trading was more subdued at retailers skewed towards lower-income shoppers, such as clothing retailer Primark (known as Penneys in Ireland), baker Greggs and discounter Poundland.
Read More: Primark Cuts Sales Outlook Following Weak Christmas Quarter
