Shop Price Inflation Rises as Britons Trade Down During Christmas Period

Grocery costs have pushed retail price inflation upwards, with the British Retail Consortium reporting a rise in shop price inflation to 0.7 per cent annually in December, up from 0.6 per cent in November. The increase reflects renewed pressure on food prices, which accelerated to 3.3 per cent from 3.0 per cent over the same period.

Consumer behaviour shifted noticeably as households responded to elevated food costs by purchasing from supermarket value ranges during the Christmas season. This trading down occurred despite retailers attempting to maintain competitive pricing on festive essentials including vegetables, cheeses and alcohol. The British Retail Consortium chief executive Helen Dickinson noted that shoppers found value across Christmas staples, enabling families to enjoy the festive period whilst managing household finances.

The performance of non-food categories presented a contrasting picture. Electronics, clothing and consumer goods experienced deflation of 0.6 per cent annually in December, matching November’s figure. Boxing Day sales contributed significantly to maintaining this deflationary pressure in the broader retail sector.

Retailers have attributed their pricing strategy to supply chain management and competitive pressure. Mike Watkins, head of retailer and business insight at NielsenIQ, observed that supermarkets reduced prices in December to support demand whilst keeping supply chain increases minimal. This approach yielded measurable results; till sales for major supermarkets rose 3 per cent during the Christmas trading period, whilst ecommerce channels expanded 9.9 per cent.

Policy decisions continue to influence grocery inflation dynamics. The Bank of England previously acknowledged that employer national insurance contribution increases imposed by Chancellor Rachel Reeves had contributed to elevated food prices throughout 2025, as supermarkets transmitted additional tax costs to consumers. Broader economic conditions suggest some relief may emerge; official inflation figures fell to 3.2 per cent in November from 3.6 per cent previously, with food inflation declining to 4.2 per cent from 4.9 per cent.

Market expectations indicate the Bank of England may reduce base rates twice during 2026, bringing rates from 3.75 per cent to 3.25 per cent. Governor Andrew Bailey signalled that inflation should return to the bank’s 2 per cent target by spring, predominantly driven by lower household energy bills following government tax adjustments announced in the November budget. These developments suggest potential relief for consumers confronting persistent food price pressures.