Consumers could face higher prices in the future as a result of rising global food prices, shipping costs, and Brexit red tape. Photo: Getty Images
Shop prices fell in February by 2.4%, the lowest deflation rate since May 2020, the latest British Retail Consortium (BRC)-Nielsen shop price index revealed on Wednesday.
The drop was driven by non-food prices which fell by 3.9% in February, compared with a decline of 3.6% in January, the fastest rate of decline since May 2020. Food inflation was steady at 0.2% in February. This is the lowest inflation rate for the category since January 2017.
"With the third lockdown constricting consumer spending across all income brackets, many retailers have been vigorously discounting products in an attempt to encourage additional spending," said Helen Dickinson, BRC's CEO. "Meanwhile, despite Brexit-related costs, food inflation remained steady thanks to fierce competition between grocers to maintain their market share amidst declining incomes for some UK households," she added. Fresh food prices fell for the third consecutive month in February, with prices decreasing by 0.8%, the same rate as in January.
Dickinson warned that consumers could face higher prices in the future as a result of rising global food prices, shipping costs, and Brexit red tape. WATCH: What it's like living in a village with 142% rise in coronavirus cases READ MORE: Lockdown costs UK retailers GBP22bn
She said many retailers are already under financial strain due to pandemic restrictions and said it is crucial the government uses Wednesday's budget "to ease cost pressures on retailers by extending targeted business rates relief for the worst-hit businesses, extending the moratorium on aggressive debt enforcement and lifting the EU state aid limits on lockdown grants." Chancellor Rishi Sunak is set to announce new measures to protect the economy through what he will hope is the final few months of the COVID-19 pandemic. He will also announce investments aimed at kickstarting a recovery as restrictions begin to ease.
Meanwhile, Mike Watkins, head of retailer and business insight at Nielsen, noted that "with the national lockdown continuing, prices across fashion and clothing retailers continue to fall ahead of the anticipated re-opening of stores in April." Story continues In December it was reported that total retail sales in 2020 declined 0.3% compared with 2019, reaching the lowest level since records began in 1995.
The Christmas period was not enough to pull them out of the doldrums, according to December's BRC-KPMG retail sales monitor. Three national lockdowns have cost retailers an estimated GBP22bn (£30.5bn) in lost sales, the BRC has previously said. It has urged the government to step in in order to avoid administrations, shop closures and job losses.
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