British consumers are bracing for a significant uptick in food prices, with inflation forecast to exceed 4 per cent this year, according to the British Retail Consortium (BRC). This projection comes despite a reported 1 per cent decrease in overall shop prices last month.
The anticipated surge is primarily attributed to governmental policy changes, including heightened employer national insurance contributions, national living wage increases, and new packaging levies. These measures are expected to impose substantial costs on retailers, with the BRC’s modelling suggesting food prices will climb by 4.2 per cent in the latter half of 2025.
Helen Dickinson, BRC’s chief executive, delivered a stark warning about the inevitability of price increases, emphasising that government intervention could help mitigate these pressures. The organisation has specifically called for careful consideration of business rates reforms to prevent additional financial strain on retailers.
Shore Capital, a prominent investment firm, estimates the impact will be particularly severe for major supermarket chains. Tesco, for instance, could face additional costs of £250 million due to the national insurance contribution increase alone, rising from 13.8 per cent to 15 per cent in April.
The timing of these increases is particularly significant as it follows a period of easing inflation, where food prices had shown signs of stabilisation. The latest figures from the Office for National Statistics indicated a slight uptick in inflation to 2.6 per cent in November, up from 2.3 per cent the previous month.
These developments may complicate the Bank of England’s monetary policy decisions, potentially delaying anticipated interest rate reductions from the current 4.75 per cent. Market analysts had previously predicted two to three rate cuts throughout 2025, but rising food inflation could force a more cautious approach.
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