Meals costs ‘not going wherever however up’, warns retail physique

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There may be “little hope” of meals costs “going wherever however up” within the second half of 2025 attributable to adjustments introduced within the Price range, a retail foyer group has warned.

The prices of upper wages and Nationwide Insurance coverage tax adjustments coming in April might be handed on to customers, the British Retail Consortium (BRC) mentioned.

It forecast meals value inflation would rise from 1.8% final month to 4.2% within the latter half of this yr, and that value rises will proceed for vegetable oil, orange juice, butter, and occasional. It added that total store costs, which have been falling, will begin rising once more.

However the Treasury mentioned the unbiased Workplace for Price range Accountability had forecast that meals inflation will keep under to 2.2% this yr.

Chancellor Rachel Reeves has beforehand mentioned “the best factor to do was to ask companies and the wealthiest in our nation to pay a bit extra”.

In her October Price range Reeves mentioned the Nationwide Dwelling Wage for over 21s would enhance from £11.44 to £12.21 an hour from April and that employers’ Nationwide Insurance coverage contributions would rise from 13.8% to fifteen%.

Retailers hit again, warning in November that increased wages and taxes would make job cuts “inevitable”, and result in value rises and store closures.

In a Christmas buying and selling replace on Thursday, Marks & Spencer (M&S) described the outlook for financial progress, inflation and rates of interest as “unsure”, including that it “faces increased prices from well-documented will increase in taxation”.

However M&S mentioned it had loved “one other good Christmas” with like-for-like meals gross sales rising by 8.9% whereas clothes, house and sweetness gross sales grew by 1.9%.

Like-for-like gross sales strip out income from new retailers opened in the course of the interval.

General gross sales for the 13 weeks to twenty-eight December elevated by 5.6%.

Different retailers additionally offered updates on buying and selling updates over the festive interval, together with:

Tesco reported a 4.1% rise in UK gross sales for the six weeks to 4 January, with meals gross sales up 4.7%. It expects full-year working income to achieve £2.9bn.

On Thursday, BRC chief govt Helen Dickinson mentioned that modelling by the foyer group, mixed with predictions from 52 chief monetary officers, had led it to forecast a lot increased meals value inflation within the latter half of the yr.

“As retailers battle the £7bn of elevated prices in 2025 from the Price range, together with increased employer Nationwide Insurance coverage, Nationwide Dwelling Wage, and new packaging levies, there may be little hope of costs going wherever however up,” she mentioned.

Nevertheless, the Treasury mentioned meals inflation had “fallen from a peak of 19.6% beneath the earlier authorities to simply 1.9%”.

It mentioned that the Labour authorities was “now targeted on placing more cash in individuals’s pockets by rising the economic system”.

A spokesperson added that it was supporting retailers by reforming enterprise charges.

The foyer group mentioned meals value inflation in December was working at 1.8%, which was its lowest charge since November 2021.

The BRC makes use of a distinct basket of products to measure inflation in comparison with official figures from the Workplace for Nationwide Statistics, however they’re broadly related.

Within the run-up to Christmas, costs went down in retailers total, however this was attributable to non-food items deflation, BRC mentioned.

The tempo of value rises for contemporary meals reminiscent of fruit and greens went up 1.2%, whereas inflation for retailer cabinet items was 2.8%.

Retailers have been warning about value rises as a result of Price range measures.

This week Subsequent introduced that it’ll increase costs on some clothes from April to offset “an unusually excessive” £73m enhance in workers wages and taxes.

Subsequent mentioned it anticipated costs to extend by 1% over a yr, which is under the present charge of inflation. UK inflation hit 2.6% within the 12 months to November, the very best degree for eight months.