Shop price inflation in the UK has climbed to its highest level in two and a half years, according to the British Retail Consortium (BRC), which cautioned that retailers can no longer hold back price rises for customers. The trade body said annual shop price inflation reached 2.1% in October, up sharply from 1.4% in September.
The BRC said the figures show retailers starting to pass on higher energy and food ingredient costs that have built up since the conflict in the Middle East began. Food inflation, which had stayed low over the past year, rose to 2.9% from 2.5% in September. Non-food inflation, covering goods such as clothing and footwear, more than doubled from 0.8% to 1.7%.
The numbers add to the pressure on chancellor John Healey, who delivers his first budget on Wednesday. Brent crude oil has recently reached $117 a barrel, far above the average of about $70 in the months before the US and Israel attacked Iran in February. Gas prices have also jumped, and the UK consumer prices index stood at 3.5% last month.
Until now, retailers had largely absorbed the higher costs of raw materials, mainly because customer demand was weak. Consumer confidence has fallen sharply since the summer, when it became clearer that the Middle East conflict was unlikely to end quickly.
Helen Dickinson, the BRC's chief executive, said: "The dam is starting to break on the huge wave of costs retailers have absorbed over the last two years." She added that although there was heavy discounting to draw shoppers ahead of Halloween, supermarkets could no longer stop the prices of tinned and packaged goods from rising.
Bank of England officials are expected to raise interest rates next week from 3.75% to 4%. If retail price rises continue, many of the nine members of the monetary policy committee are likely to favour further increases in December or early next year. The chancellor is also expected to face strong pressure from his own backbenchers, who are worried about the effect of the high cost of living on their constituents.
Separately, a report by Ruth Patrick, a professor of social and public policy at the University of Glasgow, examines how these pressures affect low-income families. Based on a long-term study, it finds that high petrol and diesel prices are hurting families who must transport disabled children to school and medical appointments, as well as workers who drive to their jobs. Petrol is above £1.75 a litre in many places and diesel often above £2, which Patrick said can mean work does not pay. She leads Changing Realities, an online project tracking 100 low-income families.
In the past month, 73% of participants had shopped in the reduced-items aisle, 62% had changed the food they buy, and 63% had left the heating off despite being cold. One respondent, Rosie L, who lives in rural Scotland, said: "It's getting to a point where I don't know how we are going to keep managing to run our car." She said public transport is not accessible or reliable where she lives and that losing the car would affect every aspect of their lives, particularly as her children are disabled.
The report draws on in-depth interviews with 70 participants, 67 of whom described steps they had taken to cut costs. Patrick said help from governments and local authorities so far has not matched the scale of the problem. She argued that the budget is a chance to deliver on Andy Burnham's pledge to lead a "cost of living government", and called for long-term steps to ensure social security is adequate, including restoring the real value of child benefit.
