Retail trade groups respond to food inflation figures

The Office for National Statistics reported that headline consumer price inflation reached 3.5% in the latest release, while food inflation remained unchanged at 1.3%. These figures prompted responses from the British Retail Consortium and the Institute of Grocery Distribution.

Harvir Dhillon, the consortium’s lead economist, explained that supermarket competition has prevented price spikes despite ongoing supply chain disruptions. He highlighted that lower costs for butter, coffee, and potatoes have relieved consumer spending pressures.

Dhillon emphasized that retailers and the government share a common goal of reducing business expenses. He argued that lower operational costs would allow retailers to resist price increases and reinvest in store improvements and hiring. The upcoming business rates adjustment for April 2027, however, poses a financial risk. Dhillon estimated that without intervention, the increase could cost retailers approximately £250 million, urging the Chancellor to freeze rates for the next fiscal year.

James Walton, chief economist at the Institute of Grocery Distribution, acknowledged the 1.3% food inflation rate but cautioned that consumers may not find much reassurance. He pointed out that while the number appears stable, underlying cost pressures from geopolitical tensions, regulatory changes, and climate-related disruptions continue to grow.

Walton described how retailers are absorbing these rising costs to maintain current price levels ahead of the critical Christmas shopping season. The strain on businesses is significant, as these pressures narrow profit margins across the entire supply chain.

According to Walton’s analysis, 79% of shoppers anticipate further food price increases next year. He stressed that building a more resilient food system with expanded domestic production capacity is essential for achieving long-term price stability.