British shop prices set for ‘severe, quick and significant’ increase due to Brexit, warns business group

BRC boss warns the cost of importing cheddar from Ireland could rise by 44 per cent overnight

British shop prices rose for the first time in more than five years this month, as the British Retail Consortium warned that customers will face more severe price hikes if no Brexit deal is reached.

Overall shop prices went up 0.1 per cent in August, compared with a decline of 0.3 per cent in July, breaking a 63 month deflation streak.

Food inflation accelerated to 1.9 per cent, up from 1.6 per cent growth in July, while non-food deflation continued easing, at 1 per cent compared to 1.4 per cent the month before.

The BRC said higher food prices was due to the hot, dry weather in the UK over the summer, which led to lower rates of production, as well as increases in the prices of oil and agricultural products across global markets earlier this year.

Meanwhile, lower deflation in non-food items was driven by the changing pattern of promotions at retailers – because of the good weather, demand for summer products earlier in the season cut out the need for stores to apply discounts.

However, the BRC said this was not the same for all categories, as clothing was the category showing the deepest deflation.

“Despite significant increases in costs in the supply chain, this month’s figures show that retailers are keeping price increases faced by consumers to a minimum,” said the BRC’s chief executive, Helen Dickinson.

However, she warned: “Current inflationary pressures pale in comparison to potential increases in costs retailers will face in the event the we leave the EU without a deal. If that does happen retailers will not be able to shield consumers from price increases.”

Ms Dickinson told the BBC that while the weather would continue to impact on food inflation, there is a bigger risk from the potential imposition of tariffs after Brexit.

This would have a “severe, quick and significant” impact on prices, she said, giving the example that the cost of importing cheddar from Ireland could rise by 44 per cent overnight.

“The EU and UK negotiating teams must deliver a withdrawal agreement in the coming weeks to avoid the severe consequences that would result from such a cliff edge scenario next March,” she added.