The British Retail Consortium (BRC) has warned that the long-running trend of falling shop prices may be coming to an end, with new data revealing significant challenges for retailers in the coming year.

Shop prices fell 0.6 per cent in November, a smaller decline compared to the 0.8 per cent deflation in the previous month. This marks the first time in 17 months that prices have fallen less than the preceding month, signalling a potential turning point in retail pricing.

Helen Dickinson, chief executive of the BRC, highlighted the complex pricing landscape. "November was the first time in 17 months that shop price inflation has been higher than the previous month, albeit remaining overall in negative territory," she explained.

The data reveals nuanced trends across different retail sectors. Non-food items remained in deflation at -1.8 per cent, slightly improved from -2.1 per cent in October. Food prices showed a modest slowdown, with inflation increasing by 0.1 percentage point to 1.8 per cent.

However, retailers face significant financial pressures. Over 70 major retailers, including Tesco, Sainsbury's, Next, Amazon, and Boots, have warned about potential inflationary impacts from upcoming tax changes.

The industry is bracing for £7 billion in additional costs in 2025, stemming from changes to employers' National Insurance Contributions, business rates, minimum wage increases, and a new packaging levy. Dickinson warned that these costs would likely be passed on to consumers: "Retail already operates on slim margins, so these new costs will inevitably lead to higher prices."

Mike Watkins, head of retailer and business insight at NielsenIQ, provided additional context about consumer behaviour. "Shoppers are still being cautious by shopping savvy for the essentials and holding back their discretionary spend," he noted.

The retail sector is experiencing particular challenges in specific product categories. Fresh food prices have seen increases, with seafood and tea experiencing notable price pressures due to import costs and poor harvests.

The BRC is calling on the government to reconsider the timelines for the new packaging levy and to ensure meaningful reductions in business rates for retailers.

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