Retailers have warned that tax rises in the upcoming budget could keep shop prices higher for longer, as new figures show annual shop price inflation jumped to 1.4% in September, up from 0.9% in August. The British Retail Consortium (BRC) said households are finding shopping increasingly expensive, with rising costs for home improvement and gardening goods offsetting stabilising food prices.
According to the BRC and analysts NIQ, non-food goods deflation appears set to end, with prices just 0.1% lower year on year in September compared with a 0.8% annual drop in August. Food price inflation levelled out at 4.2% in September, the same rate as in August, after steadily accelerating all year.
Helen Dickinson, BRC chief executive, said: 'Households are finding shopping increasingly expensive. The impact on retailers and their supply chain of both global factors and higher national insurance and wage costs is playing out in prices for consumers.' She added that high energy and labour costs, including the rise in employers' national insurance contributions, continue to push up input prices for producers. Mike Watkins of NIQ noted that low consumer confidence means retailers may have to continue offering promotions to drive sales.
The figures indicate that food inflation may have peaked, with retailers expecting it to ease late this year or from early 2026. However, earlier this month the Bank of England held off on an interest rate cut due to fears that rising food prices were putting upward pressure on headline inflation.
Chancellor Rachel Reeves has hinted at tax rises or spending cuts to fill a spending gap of up to £30bn. Dickinson warned that a new packaging tax due in October will further push up inflation, and any additional tax rises in the budget would keep shop prices higher for longer. 'Ultimately, it is British households who will bear the consequences,' she said.
Retailers face a £7bn increase in costs this year from changes to employers' national insurance, packaging levies, and the legal minimum wage introduced in April, according to the BRC.
