Consumer price inflation increased unexpectedly to 3.6 per cent in June, up from 3.4 per cent in the previous month.

Food inflation figures also rose from 4.4 per cent in May to 4.5 per cent over the four-week period.

Overall inflation sits well above the Bank of England's two per cent target, and higher than in Europe and the US.

Kris Hamer, director of insight at the British Retail Consortium (BRC) said that while inflation has risen steadily over the past 12 months, food inflation has seen a much more pronounced increase.

“Despite fierce competition between retailers, the ongoing impact of the last budget and poor harvests caused by the extreme weather have resulted in prices for consumers rising,” continued Hamer.

He added that the price of many staples rose on the previous month, including bread, rice and pasta, though prices for chocolate decreased.

“The wedge between the UK’s two per cent inflation target and reality continues," said Pieter Reynders, Partner at McKinsey & Company. "This is in the context of low GDP growth, which combined with high inflation puts real strain on consumer budgets.

"Consumers are responding to this sticky inflation picture. Our latest consumer research data shows 73 per cent of UK shoppers are trading down, buying smaller package sizes, changing to lower price brands or private labels, and turning to discounters."

He added that shifting tariff dynamics could further accelerate global inflation because as higher import duties take hold, goods with high tariffs could become more expensive in certain markets.

"While June retail sales showed a 3.1 per cent year-on-year increase, that growth may reflect short-term factors, such as seasonal weather, major events like Wimbledon or lingering food inflation, rather than a sustained recovery in spending power," said Florimond De Tinguy, VP sales for North Western EMEA at digital commerce platform VTEX. "As consumers grow more cautious, retailers will need to rethink how they drive margin.

"Offering value-added services like product protection, paid returns and reimagining loyalty perks can open new revenue streams while aligning with evolving shopper expectations."

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