The British Retail Consortium (BRC) has highlighted potential challenges as shop prices might cease to decline due to recent budget adjustments.
- Data indicates that shop prices fell by 0.6% in November, an increase from a deflation rate of 0.8% seen previously, suggesting a slowing down of price reduction.
- The retail sector is bracing for significant cost increases due to changes in National Insurance Contributions set for April.
- Over 70 major retailers have expressed concern about the inability to absorb additional costs, hinting at a probable rise in inflation.
- Industry leaders urge the government to reconsider the timelines for new levies to mitigate the impact on retail prices.
The British Retail Consortium (BRC) has issued a cautionary note regarding the diminishing rate of price reduction in shops, a topic of concern for both retailers and consumers. Data from the BRC and NIQ reveals that November saw a 0.6% drop in shop prices, a less significant fall than the 0.8% deflation recorded in October. This marks a notable shift, as it is the first instance in 17 months where the reduction in prices is less than in the preceding month.
A closer examination reveals that while non-food items remained in deflation at -1.8% in November, this figure is contrasted with October’s -2.1%, indicating a deceleration in deflation. On the other hand, food prices continue to rise, albeit marginally slower, at 1.8% in November. These figures portray a mixed scenario for different segments of the retail market.
Exacerbating the situation, retail leaders have voiced their concerns about the impending financial burden due to unavoidable changes in Employers’ National Insurance Contributions starting April. This sentiment is echoed across the industry, with more than 70 leading retailers – including prominent names like Tesco, Sainsbury’s, and Amazon – articulating their apprehensions through a formal communication to relevant authorities.
The letter, which has garnered significant attention, warns that the extensive scale of new costs could potentially drive up inflation, stating that businesses find it challenging to absorb such substantial cost hikes. “November was the first time in 17 months that shop price inflation has been higher than the previous month, albeit remaining overall in negative territory,” noted Helen Dickinson, Chief Executive of the BRC.
Alarmingly, the retail industry anticipates £7 billion in additional costs by 2025, stemming from not just the adjustments in National Insurance but also increments in business rates, minimum wage, and a newly introduced packaging levy. In light of these economic pressures, there is a call for the government to reassess the deadlines associated with these new financial obligations, particularly the packaging levy, to alleviate potential price hikes for consumers.
The retail sector is at a critical juncture, urging timely governmental intervention to maintain price stability amidst rising costs.
