November Sees Slowing Shop Price Deflation Amid Worries of Stagnating Inflation Trend
The tax burden on businesses, announced in the autumn Budget, has been projected to lead to higher prices.
Shop prices continued to decline in November but the rate of deflation slowed compared to the previous month, prompting concerns that the period of falling inflation is coming to an end.
Data released on Tuesday showed that in the first week of November, year-on-year shop price inflation was actually in deflation at -0.6 percent. But this was higher than deflation of -0.8 percent in October.
Prices in November were marginally above the three-month average of -0.7 percent, with annual growth remaining at its lowest rate since September 2021.
Fresh foods appeared to be the major culprit for the monthly change, accounting for the rise from 1 percent in October to 1.2 percent in November.
BRC Chief Executive Helen Dickinson said in a statement: “November was the first time in 17 months that shop price inflation has been higher than the previous month, albeit remaining overall in negative territory.
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“Food prices increased for fresh products such as seafood, which is more vulnerable to high import and processing costs, especially during winter.”
She added that prices remained high for tea products, as poor harvests in key producing regions continued to impact supply.
Coffee prices “experienced a momentary dip,” but are expected to rise imminently owing to global prices approaching record highs.
Overall, food inflation slowed to 1.8 percent in November, down from 1.9 percent in October. The BRC said it was below the three-month average rate of 2.0 percent.
The annual rate of inflation in the food category continues to slow, and is currently at its lowest rate in three years.
The rate of deflation in non-food items has slowed and was higher in November than in the preceding month. While still in deflation, the rate moved from -2.1 percent up to 1.8 percent.
“In non-food, while many retailers unwound some of their discounting, there are still many bargains across fashion and furniture. Customers looking to upgrade their electricals were able to pick up some great deals in early Black Friday sales,” Dickinson said.
Inevitable Surge in Prices
The BRC warned that the slowdown in the monthly deflation rate, reflected in the November figures, “may signal the end of falling inflation.”
Dickinson pointed to the impact of the autumn Budget measures on businesses across the country.
Last month, Chancellor Rachel Reeves announced rises in employer national insurance contributions, along with the expansion and rise of the National Living Wage. Under Labour’s plans, businesses will pay a rate of 15 percent on employees’ earnings above a threshold of £5,000.
Minimum wages will rise next year to £12.21 an hour for those aged 21 and over, with further increases for younger workers.
Elsewhere, retail, hospitality, and leisure properties with rateable values below £500,000 will be taxed under permanently lower rates from 2026–2027. This will be funded by higher taxes on properties with a rateable value of £500,000 and above, including large distribution warehouses, often operated by supermarkets and retails firms.
Reeves also said the plastic packaging tax will rise from £217.85 to £223.69 from April 2025.
“The industry faces £7 billion of additional costs in 2025 because of changes to Employers’ National Insurance Contributions, business rates, an increase to the minimum wage and a new packaging levy.
“Retail already operates on slim margins, so these new costs will inevitably lead to higher prices,” said Dickinson.
She urged the government to reconsider the timelines for the packaging levy and ensure the business rates tax policy offers “a meaningful reduction for all retailers as early as possible.”
Head of retailer and business insight at NielsenIQ, Mike Watkins, said that shoppers are being “cautious” and are holding back on their expenses.
“So the lower level of inflation should help sentiment ahead of Black Friday promotions. And with lower inflation than this time last year, many food retailers are extending offers and discounts to help sales momentum in December,” he said.
The confederation warned that Budget tax hikes caught UK firms off guard and made it harder to expand, invest, and hire new people.
