Food inflation climbs as retailers struggle with increased costs

Food prices jumped for the fourth month in a row, as retailers are now faced with absorbing an additional £5bn in costs from last year’s controversial Budget.

For the first week of May, food inflation increased 2.8% year on year, against a 2.6% jump in April, according to the latest BRC-NIQ Shop Price Index.

Fresh food inflation jumped 2.4% year on year, while ambient food inflation decreased to 3.3% over the same period.

Overall shop price deflation was unchanged at 0.1%, while non-food deflation jumped 1.5% year on year.

BRC chief executive Helen Dickinson said: “While overall shop prices remain unchanged in May, food inflation rose for the fourth consecutive month. Fresh foods were the main driver, and red meat eaters may have noticed their steak got a little more expensive as wholesale beef prices increased. Non-food prices remained in deflation, but this slowed in categories such as fashion and furniture as retailers began to unwind heavy promotional activity. Prices were falling faster for electricals as retailers tried to encourage spending before any potential knock-on impact from US tariffs.

“With retailers now absorbing the additional £5bn in costs from April’s increased Employer National Insurance contributions and National Living Wage, it is no surprise that inflation is rearing its head once again. Later this year, retailers face another £2bn in costs from the new packaging tax, and there are further employment costs on the horizon from the implementation of the Employment Rights Bill. The government must ensure the Employment Rights Bill is fit for purpose, supporting workers’ rights while protecting jobs and investment for growth. If statutory costs continue to rise for retailers, households will have to brace themselves for more difficult times ahead as prices rise faster.”