The British Retail Consortium (BRC) has said that food prices are set to rise by an average of 4.2 per cent in the latter half of the year.

Modelling by the trade association and retail chief financial officers also suggests that non-food will “return firmly to inflation” over the same period.

The BRC says that higher prices will be driven by headwinds largely associated with £7 billion worth of increased costs in 2025 following the Labour government’s Autumn Budget, including higher employer National Insurance Contributions, National Living Wage, and new packaging levies.

The comments come as the organisation publishes December retail price figures alongside global marketing research company NielsenIQ.

In December, overall shop price deflation was one per cent, up from deflation of 0.6 per cent in the previous month.

While non-food remained in deflation at -2.4 per cent over the four-week period, edging down from -1.8 per cent in November, the BRC said that the later timing of Black Friday in 2024 meant that 1-7 December data period included the final days of the Black Friday discounting period, which means the figure is likely to appear more deflationary than the underlying trend.

Food inflation was unchanged at 1.8 per cent in December.

“Retailers discounted heavily for Black Friday this year as they attempted to make up for weaker sales earlier in the year," said Helen Dickinson, chief executive, BRC. "However, the later Black Friday timing brought many of the non-food discounts into the measurement period, making non-food prices look more deflationary than the underlying trend.

"With food inflation bottoming out at 1.8 per cent, and many price pressures on the horizon, shop price deflation is likely to become a thing of the past."

Head of retailer and business insight at NielsenIQ Mike Watkins said that while shoppers benefited from both lower inflation and bigger discounts in December 2024 compared to the previous year – as both retailers were eager drive sales after a slow start to the quarter – higher household costs are "unlikely to dissipate anytime soon so retailers will need to carefully manage any inflationary pressure in the months ahead."

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