British shop prices experienced their fastest drop in over three years this October, according to the British Retail Consortium (BRC). However, this trend could face reversal following the upcoming budget announcement by Finance Minister Rachel Reeves, the BRC cautioned on Tuesday.
Shop prices fell by 0.8% over the past 12 months, marking the steepest decline since August 2021 and a sharper fall than September’s 0.6% decrease. This month’s numbers continue a trend, with eight of the last nine months seeing a slowdown in price growth.
Food prices in stores rose by 1.9%, while non-food items saw a steady decline at 2.1%. Clothing prices, which have been heavily discounted this year, saw a slight increase for the first time since January as retailers scaled back on markdowns.
“Households will be glad to see continued relief from price inflation,” noted BRC chief executive Helen Dickinson. However, she warned that this downward trend faces risks from ongoing global tensions, climate related impacts on food production, and rising costs from government regulations in the pipeline.
In Wednesday’s budget, Finance Minister Rachel Reeves is expected to announce an increase in social security contributions required from businesses for their employees. This move has raised concerns among employers, who are also anticipating labor market reforms aimed at strengthening worker protections.
“Retail is already bearing a higher tax burden compared to other sectors,” Dickinson stated, urging Reeves to consider reducing the business rates tax imposed on retailers.
Recent official data showed that consumer price inflation dropped to 1.9% in September, significantly below the 41-year high of 11.1% recorded in October 2022. The Bank of England is expected to lower borrowing costs in November, marking only the second rate cut in four years.
