In January, non-food shop prices in the UK experienced a significant increase, raising concerns for consumers. Despite the month being known for clearance sales, non-food prices saw a rise. The British Retail Consortium (BRC) reported that shoppers faced the largest price hike in over nine years during this period. Overall, UK shop prices increased by 1.5% compared to January 2021, marking the highest increase since December 2012.
These findings from the BRC come just ahead of the Bank of England’s monetary policy committee meeting, where it is expected that interest rates will be raised. This move will further strain the disposable incomes of individuals with mortgages and credit card debts, as well as increasing borrowing costs for companies.
Food prices were the main driver of the price increase last month, rising by 2.7%. Additionally, non-food prices also saw a 0.9% increase. This leaves consumers with a difficult choice – deciding between purchasing essential goods, such as food, at higher prices or indulging in non-essential items, like fashion, at a higher cost. Given this predicament, many consumers are likely to prioritize essential purchases over discretionary ones.
The rise in prices also presents challenges for companies. To remain financially stable amid increased costs, businesses are forced to pass on these expenses to customers through higher retail prices. Various fashion retailers, both large and small, have already announced plans to raise their prices to offset rising costs. While some companies may implement moderate price increases, others are opting for double-digit percentage raises.
December witnessed an overall inflation rate of 5.4%, and predictions suggest that inflation may reach as high as 6% sometime this year. The surge in energy and travel costs has already begun to impact disposable incomes, potentially resulting in a decline in consumer spending. NielsenIQ, which compiles data in conjunction with the BRC, states that rising living costs are the primary concern for nearly 50% of households.
The current situation in the UK retail sector indicates that consumers will face difficult choices when it comes to spending. With prices on the rise and disposable incomes under pressure, individuals may adopt more cautious spending habits. This trend could have an impact on retailers and companies across various sectors, particularly those that rely on non-essential purchases.
Useful links for more information:
1. BRC: UK Shop Prices Rise for Second Consecutive Month in January 2022
2. Bank of England
