Key Takeaways
- The British Retail Consortium’s shop price index showed a 1.5% annual rise in January, the fastest pace since February 2024.
- Food prices were 3.9% higher than a year earlier, driven by high business energy costs and the hike to National Insurance.
- Non-food prices rose by 0.3%, the biggest annual rise since February 2024.
- Official consumer price inflation data for December rose to 3.4% from 3.2%.
- The Bank of England Governor expects CPI to fall close to 2% by April or May, largely due to different one-off price changes in regulated prices and taxes.
Introduction to Shop Price Inflation
The latest industry figures have shown that prices at major British retailers have risen at the fastest pace since February 2024. The British Retail Consortium’s shop price index revealed a 1.5% annual rise in January, up from a 0.7% gain in December. This increase is largely driven by a pick-up in prices for food, as well as furniture and health and beauty products. The rise in food prices is particularly notable, with a 3.9% increase compared to the same period last year, up from a 3.3% rise in December. This is the biggest increase in food prices since October, and it is likely to have a significant impact on households and businesses across the UK.
Causes of Shop Price Inflation
The main drivers of the increase in shop prices are high business energy costs and the hike to National Insurance. According to Helen Dickinson, the Chief Executive of the British Retail Consortium, "Any suggestion that inflation has peaked is simply not borne out by these figures." She added that "shop price inflation jumped this month due to high business energy costs and the hike to National Insurance continuing to feed through to prices." The increase in National Insurance payments has had a particularly significant impact on sectors with more lower-paid, part-time staff, such as retail. In April 2025, there was a 25 billion-pound increase in employers’ National Insurance payments, which has had a ripple effect on the economy.
Non-Food Price Inflation
Non-food prices have also risen, with a 0.3% annual increase, the biggest rise since February 2024. This increase is significant, as it suggests that the rise in prices is not limited to food, but is a broader phenomenon. The rise in non-food prices is likely to be driven by a range of factors, including increased production costs, supply chain disruptions, and changes in consumer demand. The increase in non-food prices is likely to have a significant impact on households, particularly those on lower incomes, who may struggle to afford essential items.
Official Consumer Price Inflation Data
The official consumer price inflation data for December showed a rise to 3.4% from 3.2%. This increase is significant, as it suggests that inflation is still a major concern for policymakers and households. The data also showed that food and non-alcoholic drink prices rose 4.5% year-on-year, less than the 5.3% forecast by the Bank of England in November. The Bank of England Governor, Andrew Bailey, expects CPI to fall close to 2% by April or May, largely due to different one-off price changes in regulated prices and taxes this year compared to 2025. However, the latest data from the British Retail Consortium suggests that inflation may be more persistent than expected.
Implications of Shop Price Inflation
The rise in shop prices has significant implications for households and businesses across the UK. For households, the increase in food prices is likely to have a major impact on their disposable income, particularly for those on lower incomes. For businesses, the rise in prices is likely to have a significant impact on their profitability, particularly for those in the retail sector. The increase in prices is also likely to have a broader impact on the economy, as it may lead to a reduction in consumer spending and a slowdown in economic growth. Overall, the latest data from the British Retail Consortium suggests that inflation is still a major concern for policymakers and households, and that it may be more persistent than expected.
