Inflation in UK Stores Climbs to Near Two-Year High, BRC Says

nt7u{e8gp79vcllu1{5u()di_media_dl_1.png British Retail Consortium

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(Bloomberg) — Inflation in British shops rose to the highest level in almost two years as retailers grapple with higher costs, an industry survey found.

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Prices of commonly purchased products climbed 1.5% in January from a year earlier, the fastest pace since February 2024, the British Retail Consortium said Tuesday. It was 0.7% in December. Food inflation rose to 3.9%, the most since September.

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Energy costs and the hike to National Insurance contributions — a payroll levy — continue to impact prices, the BRC said. Meat, fish and fruit were particularly affected, reflecting weak supply and stronger demand, while prices also rose for non-food categories including furniture, flooring, and health and beauty.

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“It is a challenging time for households,” Helen Dickinson, the BRC’s chief executive officer, said in a statement. “Retailers do what they can to keep prices down in a competitive market, but thin margins and rising costs of government policy make it harder.”

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Climbing grocery bills will be a concern for Bank of England rate-setters after cooling food price growth helped to bring down overall inflation quicker than had been expected in recent months.

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Officials are watching food costs closely after they helped push inflation to almost double the BOE’s 2% target last year. Groceries are particularly salient for household inflation expectations, which have remained at elevated levels.

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The central bank has signaled it is nearing the end of a rate-cutting cycle, with markets seeing little prospect of another move at next week’s meeting.

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Some of Britain’s biggest retailers reported a tough performance over the Christmas period as consumer demand proved volatile. Primark posted weak sales while Tesco Plc and Marks & Spencer Group Plc both missed expectations.

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Claire’s Accessories and The Original Factory Shop entered insolvency proceedings earlier this month with owner Modella Capital blaming weak consumer confidence, cost inflation and the government’s tax policies.

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“Shoppers are always cautious about spending in January and this will not be helped by the continuation of inflation,” said Mike Watkins, head of retailer and business insight at NIQ, which compiled the data for the BRC. 

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