Recent budget changes could halt the decrease in shop prices, warns BRC. Retailers are likely to face increased costs.
- Shop prices showed a drop of 0.6% in November, which is a lesser decline compared to October.
- It marked the first instance in 17 months where the price drop was smaller than the previous month.
- Key factors include new National Insurance Contributions impacting retail taxes by millions.
- Industry leaders urge the government to review timelines for upcoming financial changes to mitigate impact.
The British Retail Consortium (BRC) has issued a cautionary statement highlighting potential challenges in the retail sector as falling shop prices might cease following recent budget announcements. Retailers are set to encounter higher costs in light of these changes, complicating efforts to maintain affordability for consumers.
November’s data indicates a shop price decline of 0.6%, a decrease from the previous month’s deflation rate of 0.8%. This represents a pivotal moment, as it is the first occurrence in 17 months where the reduction in prices was less pronounced than the month prior. This trend signals a potential shift in the retail price landscape.
The report outlines that non-food items continued to experience deflation at a rate of -1.8% in November, slightly improved from -2.1% in October. In contrast, food prices saw a modest slowdown, increasing by 1.8%, a mere 0.1 percentage point decrease from the previous rate.
Retail executives have expressed concerns that the impending adjustments to National Insurance Contributions starting in April will significantly inflate their tax liabilities. These changes, accompanied by increased business rates, a higher minimum wage, and a new packaging levy, are projected to add approximately £7 billion to retail expenses by 2025.
Retail sector figures, including over 70 leading companies, have communicated their apprehension about these financial pressures in a letter to policymakers. They argue that the magnitude of these new costs will likely boost inflation, as it will be challenging for enterprises to absorb such extensive financial burdens without passing them onto consumers.
BRC’s chief executive, Helen Dickinson, remarked on the seriousness of the situation, suggesting that November’s figures might mark the conclusion of a long period of declining inflation. She stressed the importance of government intervention to ease these looming cost pressures by reconsidering the timeline for the packaging levy and ensuring significant reductions in business rates for retailers.
Retailers brace for potential end to declining costs, urging policy adjustments to ease future burdens.
