For the first time in nearly a year, shop prices in the UK have returned to inflation. According to the British Retail Consortium (BRC) and NIQ Shop Price Index, prices in June were 0.4 percent higher than in the same month last year.
This marks a clear shift from May, which saw prices fall by 0.1 percent.
Food Prices Are Driving the Rise
Food inflation increased sharply in June, rising to 3.7 percent from 2.8 percent the month before. Fresh food prices were 3.2 percent higher than last year.
Key reasons for the rise include:
- Higher wholesale costs and labour expenses pushing up meat prices
- Hot dry weather reducing harvest yields, increasing the cost of fruit and vegetables
Non-Food Prices Remain Lower – For Now
Non-food items such as DIY and garden products are still 1.2 percent cheaper than last year. However, this drop is smaller than the 1.5 percent decline recorded in May, suggesting that retail price cuts may be slowing.
What Is Causing Prices to Rise?
Helen Dickinson, Chief Executive of the BRC, said the return to inflation is closely linked to last autumn’s budget. Changes such as increases to the National Living Wage and employer National Insurance contributions have raised business costs significantly.
These pressures are now being passed on to consumers.
Additional factors include global instability and the impact of climate change on food supply chains.
Mike Watkins, Head of Retailer and Business Insight at NielsenIQ, said that broader economic pressures and ongoing supply chain issues are continuing to drive up prices.
What This Means for You
Although the inflation rate is still low, this shift may signal further rises ahead. If prices continue to rise and household confidence weakens, there could be a knock-on effect across the retail sector.
How Nordens Can Help
Whether you are a business managing price increases or an individual concerned about your financial outlook, Nordens is here to help.
We have dedicated teams across retail, tax, payroll, financial planning and business strategy who are ready to support you.
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