The BRC gauge is a narrow, backward-looking snapshot, so the market is likely to look past the small dip in shop prices and focus on the official inflation path, which is forecast to climb above 4% next year. Energy is the swing factor: oil and gas prices tied to the Iran conflict feed directly into retailers’ costs and into the inflation outlook, so diplomacy headlines can move UK rate and sterling expectations quickly. A budget that eases business rates would offer retailers some relief, but it would not remove the wider energy-driven cost pressure.
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Shop price inflation eased again in September, but retailers say they are close to their limit as war-driven costs mount and the budget approaches.
Summary:
- Annual UK shop price inflation slowed to 1.4% in September from 1.5% in August, a little above the three-month average of 1.3%, according to the British Retail Consortium.
- Food inflation eased to 2.5% from 2.8% as promotions cut meat and dairy prices, although poor European harvests lifted fruit prices and high commodity prices kept chocolate and confectionery elevated.
- Non-food inflation slowed to 0.8% from 0.9% as heavy discounting lowered the cost of back-to-school essentials.
- The BRC’s chief executive said retailers have absorbed successive cost increases and cited higher business rates in April, rising employment costs, energy bills and packaging taxes.
- The BRC wants finance minister John Healey to help with business rates in his October 28 tax and spending plan.
- Broader official UK inflation rose to 3.1% in August and is expected to move above 4% in early 2027 because of the Iran war energy shock.
British shop price inflation slowed slightly in September, but the British Retail Consortium warned that retailers are running out of room to absorb the extra costs created by the Iran war. Its survey showed annual shop price inflation easing to 1.4% from 1.5% in August, though the reading was a touch above the three-month average of 1.3%.
Food prices drove much of the change. Food inflation slowed to 2.5% from 2.8% as promotions pulled down the cost of meat and dairy. That relief was partly offset by poor harvests in Europe, which pushed up fruit prices, while high commodity prices kept chocolate and confectionery expensive. Non-food inflation also edged lower, to 0.8% from 0.9%, as heavy discounting reduced the price of back-to-school essentials. The survey is based on prices collected between September 1 and September 7.
BRC chief executive Helen Dickinson said retailers have absorbed a succession of extra costs but that there is a limit to what businesses can carry. She pointed to higher business rates due in April, together with rising employment costs, energy bills and packaging taxes, and described the coming budget as a critical juncture for the sector. The BRC wants finance minister John Healey to use his October 28 tax and spending plan to help retailers with their business rates bills, arguing that this would help keep prices down.
The softer shop price reading contrasts with the wider inflation picture. Britain’s broader official consumer price index rose to 3.1% in August and is expected to move above 4% in early 2027 because of the energy price shock linked to the Iran war. That gap suggests the pressures retailers describe have yet to work fully through to shelf prices, even if promotions and discounting are holding back the retail measure for now.
Attention now turns to the next official inflation readings, to whether energy costs keep rising as the Iran conflict continues, and to what the budget on October 28 offers retailers on business rates.
This article was written by Eamonn Sheridan at investinglive.com.