In September, UK retailers faced challenges due to unfavourable weather, leading to significant price reductions.
- The British Retail Consortium (BRC) and NielsenIQ released figures indicating a 0.6% year-on-year drop in shop prices, the steepest since August 2021.
- Non-food items such as furniture and clothing experienced notable price cuts, driven by competition among retailers.
- Food inflation marginally increased to 2.3% because of poor harvests in critical regions, affecting cooking oils and sugary items.
- Retail sales volumes rose by 2.5% in August, attributed to heightened spending on various goods due to warm weather and promotional events.
The latest data from the British Retail Consortium and NielsenIQ revealed that UK shop prices fell by 0.6% year-on-year in September, representing the most significant decline since August 2021. This decrease follows a 0.3% drop in August. Helen Dickinson, the chief executive of the BRC, remarked, “September was a good month for bargain hunters as big discounts and fierce competition pushed shop prices further into deflation.” She warned, however, that external factors such as geopolitical tensions, climate change, and governmental costs might reverse this positive trend.
Retailers sought to attract reluctant consumers by offering substantial discounts, particularly in the non-food sectors. Items like furniture and clothing saw some of the most considerable price reductions. Consequently, non-food prices fell by 2.1% from the previous year, surpassing August’s 1.5% reduction and marking the lowest rate since March 2021.
Conversely, food inflation slightly increased to 2.3%, prompted by unsatisfactory harvests in pivotal production areas, elevating the costs of cooking oils and sugary goods. Mike Watkins of NielsenIQ noted that non-food price deflation would aid consumers in managing their household budgets for the rest of the year, though he emphasised the necessity for retailers to continue offering compelling promotions as the festive season approaches.
August saw a 2.5% increase in retail sales volumes, the highest since July 2022, driven by intensified expenditure on food, clothing, footwear, and household items. The Office for National Statistics attributed this rise to the combination of warm weather and clearance sales.
Ahead of the budget announcement on October 30th, Helen Dickinson urged Chancellor Rachel Reeves to address the excessive tax burden on physical retailers. She advocated for a 20% retail rates correction to balance the disparity with online retailers, aiming to support competitive pricing, secure employment, and stimulate further investment.
The economic outlook for UK retailers remains mixed, with deflation in non-food sectors providing opportunities despite rising food costs.
