UK shop inflation returns as food costs surge

(Sharecast News) - Shop prices returned to inflation in June on the back of a big jump in food prices, fuelled by high wholesale prices and rising wage bills. According to the British Retail Consortium-NIQ Shop Price Index released on Tuesday, prices at UK tills were up 0.4% compared with last June, following a 0.1% year-on-year decline in May.

The annual rate of food inflation surged to 3.7% from 2.8%, while non-food deflation eased to -1.2% from -1.5%.

This was the first time in nearly a year that headline shop prices recorded year-on-year growth, according to BRC chief executive Helen Dickinson, who linked the return to inflation to the increased costs for retailers listed in the Autumn Budget, which took effect in April.

Rising costs of fresh produce were partly to blame for the big jump in food inflation, with meat prices in particular hit by high wholesale prices, while fruits and vegetables were more expensive as the hot weather reduced harvest yields.

Meanwhile, non-food product prices remained lower than last year as retailers continued to cut prices for things like DIY and gardening goods due to seasonal promotions.

"Retailers have warned of higher prices for consumers since last year's Autumn Budget and the huge rises to Employer National Insurance costs and the National Living Wage. We predicted a significant rise in food inflation by the end of this year, and this has been accelerated by geopolitical tensions and impacts of climate change," Dickinson said.

"To limit further rises, Government must find ways to alleviate the cost pressures bearing down on retailers. The upcoming business rates reform offers such an opportunity, and the Government must ensure no shop pays more as a result of the changes."