Shop prices hit record high as retail urges new prime minister to ease cost burden

Inflation accelerated to 5.1% during August, up from 4.4% in July, according to the monthly BRC-NielsenIQ Shop Price Index.

It marked the highest rate of shop price inflation since the index began back in 2005. 

Food inflation hit 9.3% in August compared with the same month a year ago, up from 7% in July. The last time it reached that level was during the global financial crisis in August 2008.

The British Retail Consortium (BRC) warned “there is only so much” of the cost pressure that retailers can withstand. It called on the next prime minister – Liz Truss or Rishi Sunak will be voted into the role by Conservative Party members next week – to seize “an opportunity to relieve some of the cost burden bearing down on retailers”.

Fresh food inflation was the main driver of rising prices during August, surging 10.5% year on year, compared with 8% in July. Prices of ambient food rose 7.8%, the data showed. 

The war in Ukraine and the resulting spike in prices of fertiliser, wheat, vegetable oils and animal feed are all causing havoc at the shelf edge as retailers attempt to keep prices low for consumers during a cost-of-living crisis.

But the BRC-NielsenIQ data suggested big price rises were coming through in products such as milk, margarine and crisps. 

BRC chief executive Helen Dickinson said: “The rise in shop prices is playing into wider UK inflation, which some analysts are predicting could top 18% in 2023. The situation is bleak for both consumers and retailers, but retail businesses will remain committed to supporting their customers through offering discounts to vulnerable groups, expanding value ranges, fixing prices of essentials and raising staff pay. 

“However, as retailers also grapple with growing cost pressures, there is only so much they can shoulder. The new prime minister will have an opportunity to relieve some of the cost burden bearing down on retailers, like the upcoming increase in business rates, in order to help retailers do more to help their customers.”

NielsenIQ head of retailer and business insight Mike Watkins added: “Inflation continues to accelerate and shoppers are already cautious about how much they spend on groceries, with a fall in volume sales at supermarkets in recent months. 

“We can expect this level of food inflation to be with us for at least another six months, but hopefully some of the input cost pressures in the supply chain will eventually start to ease.

“However, with further falls in disposable incomes coming this autumn as energy costs rocket again, retail spend will come under pressure in the all-important final quarter of the year.”