UK in-store inflation accelerated to 1.5% year on year in August, its highest level in two years, intensifying pressure on Andy Burnham to broaden his cost of living support measures. The figure, released by research company NIQ for the British Retail Consortium, marks a sharp rise from 0.9% in July.
The acceleration was driven largely by tinned and packaged food prices, which jumped 2.5% year on year in August, up from 1.1% in the previous month. These ambient foods, typically imported and processed, are feeling the squeeze from higher energy, input and commodity costs.
Retailers' response to rising costs
Helen Dickinson, chief executive of the British Retail Consortium, said: "The impact of higher energy, input and commodity costs is beginning to filter through into prices, particularly for ambient foods which are typically imported and processed."
In non-food categories, electrical prices rose amid the ongoing AI boom, which is forcing up the cost of memory chips and storage. Meanwhile, retailers kept clothing prices low to offer value for families preparing for the new school year.
Dickinson added: "The months ahead look challenging for households, with rising bills putting further pressure on budgets." She noted that companies were facing "persistently high operating costs" that limited their ability to absorb price rises.
Government support under scrutiny
Despite businesses being hit hard by rising energy costs, households are unlikely to receive further energy bills support before the October price cap. Government sources indicated that more targeted measures could be considered if there is a further shock in January.
Labour Party leader Mr Burnham said on Wednesday that rising energy bills were "difficult for people and I recognise that" but stopped short of promising intervention beyond the VAT cut. He said the government "would continue to look as we go forward at how we get energy prices down in the long term".
Any further support would be costed in the budget, and officials would wait to see how the conflict in the Gulf developed over the coming months, sources confirmed.
Retailers call for action on business costs
Dickinson urged the government to address the cost of doing business, saying: "If the government is serious about supporting growth while keeping the cost of living in check, it must address the cost of doing business, including by tackling the growing burden of business rates, packaging and employment taxes."
The British Retail Consortium's data highlights that retailers are limited in their ability to absorb price increases, with operating costs remaining persistently high. The coming months are expected to remain challenging for households as bills continue to rise, putting further pressure on budgets.
