Food price rises ‘likely’ amid Brexit red tape and driver shortages, warn economists

‘Mounting pressures from rising commodity and shipping costs as well as Brexit-related red tape, mean [low costs] will not be sustainable for much longer,’ warns British Retail Consortium

Tom Batchelor
Wednesday 01 September 2021 09:07

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Prices for some goods rose sharply over the past month as businesses faced “rising commodity and shipping costs as well as Brexit-related red tape”, according to the British Retail Consortium (BRC).

The cost of electrical goods saw a particularly steep rise while in other sectors there was a marked slowdown in the rate of deflation.

Experts have warned about the prospect of inflation with food price rises “likely” in the coming months.

The BRC-NieslenIQ shop price index revealed that shop prices overall decreased by 0.8 per cent year-on-year, a significant slowdown from 1.2 per cent deflation in July.

Non-food deflation slowed to 1.2 per cent in August, from a rate of 1.8 per cent in July, and food prices moved 0.2 per cent lower for the month, slowing from a 0.4 per cent fall a month earlier.

Helen Dickinson, chief executive of the BRC, said a combination of new regulations hindering trade between the EU and UK, a shortage of lorry drivers and a global lack of microchips had combined to create conditions for future inflation.

She said: “While it is good news that overall retail prices fell year-on-year, there was a slight rise in prices on the previous month.

“There are some modest indications that rising costs are starting to filter through into product prices.

“Some of the non-nood categories, such as electricals, saw sharp rises in inflation compared to last year, owing to global issues from delayed shipping and shortages of microchips.

“Food retailers are fighting to keep their prices down as far as possible.

“But mounting pressures – from rising commodity and shipping costs as well as Brexit-related red tape, mean this will not be sustainable for much longer, and food price rises are likely in the coming months.”

The BRC-NieslenIQ shop price index is a a monthly measure of UK shop price inflation, taking changes in the price of 500 of the most commonly bought items into account.

Ms Dickinson added: “Low prices are already under threat, and now the HGV driver shortage has created an additional problem with a shortfall of 90,000 drivers.

“Disruption has been limited so far, but in the run-up to Christmas the situation could get worse, and customers may see reduced choice and increased prices for their favourite products and presents.

“The government must act swiftly and rapidly increase the number of HGV driving tests taking place, provide temporary visas for EU drivers, and make changes on how HGV driver training can be funded.

“Without government action, it will be the British consumers who will pay the price.”

Mike Watkins, head of retailer and business insight at NielsenIQ, said: ”The good news for shoppers is that shop price inflation remains below consumer price inflation and any moderate increases in prices are being driven by wider economic conditions and seasonal supply changes.

“With shoppers now returning from their summer holidays, many will be reviewing their household budgets.

“So the next few months will be an important time for retailers to keep prices stable by absorbing as much of any increase in their supply chain costs as possible.”

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