Shop Price Inflation Shows Signs of Slowing
As the UK approaches the crucial Christmas shopping season, there’s a glimmer of hope with shop price inflation slowing for the sixth consecutive month. The British Retail Consortium (BRC) reports a decrease to 4.3% in November, down from 5.2% in October. Yet, this dip doesn’t signal a reduction in prices but rather a slower rate of increase.
Retailers Face New Challenges in 2024
The BRC has raised concerns that the government’s latest measures, including tax hikes and Brexit-related bureaucracy, could hinder efforts to combat inflation. These “government-imposed” obstacles, alongside the record increase in the ‘national living wage,’ may reverse the progress made in reducing inflation rates, particularly within the food sector, according to BRC chief executive Helen Dickinson.
Government’s Economic Strategy Under Scrutiny
Chancellor Jeremy Hunt’s autumn statement outlined steps to achieve Prime Minister Rishi Sunak’s goal of halving inflation. Despite a significant reduction from last year’s peak, with inflation dropping from 11.1% to 4.6%, the BRC warns that the costs of government policies will likely lead to higher shelf prices for consumers. This includes a business rates increase from April, which could add over £400m to retailers’ expenses.
Living Wage Increase and Retail Sales Decline
The impending nearly 10% rise in the national living wage to £11.44 an hour poses another challenge for retailers. With consumer spending in decline and tax burdens growing, the sector is facing tough times. The Confederation of British Industry (CBI) has highlighted a continuous drop in retail sales volumes and a potentially “disappointing” festive period for retailers.
Business Rates and Brexit Red Tape Weigh on Retailers
While the government has made some concessions for small businesses and less expensive properties, many retailers are still grappling with increased costs. The CBI’s principal economist, Martin Sartorius, expressed disappointment that the chancellor’s statement did not offer relief from the upcoming business rates hike. The added expenses of post-Brexit import checks and new labelling rules are also expected to burden consumers.
Government Response to Retailers’ Concerns
In response to the industry’s apprehensions, the Treasury has pointed to tax cuts on investments and extended business rates relief for over a million business properties as evidence of their support. A spokesperson emphasized the government’s commitment to reducing inflation to 2% and the Office for Budget Responsibility’s confirmation that current policies will not only lower inflation but also stimulate growth and reward hard work.