Shop prices in the UK rose at their slowest rate in more than 18 months in January, according to the latest report from the British Retail Consortium (BRC).
Inflation, the rate at which prices increase, has reached near-record highs recently, contributing to a cost-of-living crisis. However, discounts and lower prices for milk and tea helped reduce shop price inflation to 2.9%, down from 4% in December. While prices in shops are still rising, they are doing so at a slower rate. Food prices, on average, continue to rise by more than 6% annually.
The BRC, which represents some of the UK’s largest retailers, noted that January’s shop price inflation was at its lowest level since May 2022. Post-New Year discounts also helped slow the rate of price increases for non-food products, which eased to 1.3%, down from 3.1% the previous month. Despite this, the BRC warned that many households had yet to feel the benefit of lower inflation, cautioning that price increases could accelerate again.
Helen Dickinson, chief executive of the BRC, expressed concern that progress in slowing price rises could be hindered by other cost pressures, including the upcoming increase in the National Living Wage and a rise in business rates in April. “Rising geopolitical tensions will also add to uncertainty and costs in supply chains. With a general election later this year, we want to see political parties outline how they will help unlock investment across the country, rather than the current trajectory, which is doing just the opposite,” she said.
Separate data from research firm Kantar showed that food price inflation fell at a slower rate in January, partly due to fewer people purchasing promotional items compared to December. Kantar also noted that 86 million more lunchboxes were taken to work or school in 2023 as people aimed to manage their budgets more closely.
Fraser McKevitt, head of retail and consumer insight at Kantar, highlighted that Dry January led to a significant drop in alcohol spending, which fell by more than half compared to December. Nearly 6% of beer packs sold in January were no or low-alcohol options, a rise from 4% at the end of last year. Sales of own-label plant-based products also increased by 8% as Veganuary gained traction.
Although tobacco and alcohol prices remain high, there is hope that headline inflation could approach the Bank of England’s 2% target as energy bills are predicted to decrease in 2024. This anticipated drop in inflation has raised expectations that the Bank may cut its key interest rate, currently at a 15-year high. The Bank of England has raised interest rates 14 times since December 2021 to combat inflation, which has strained UK households’ finances over the past two years.