British retailers have again warned that they plan to raise prices for food and other items in 2025, contributing to wider inflation pressures, as they do not intend for the government's Budget changes to eat into their profits.
The industry has been campaigning against the tax and National Insurance changes announced in the Autumn Budget, which Next PLC (LSE:NXT) said earlier this week will cost it around £67 million over a full year.
Food prices are forecast to climb by an average of 4.2% in the latter half of the year, according to calculations by the British Retail Consortium (BRC) and sector finance chiefs.
They predict non-food items are likely to increase in line with inflation, which was 2.6% in November.
Shop prices were moving lower at the end of last year, with deflation of 1% in December and averaging 0.8% over the preceding three months.
The BRC said shop price annual growth remained at its lowest rate since August 2021, with non-food deflation at 2.4% in December, below its three-month average of 2.1% and the biggest fall since April 2021.
Food prices were rising though, with inflation at 1.8% in December and averaging the same over three months before, though the annual rate eased since the start of last year, with food inflation around the lowest rate since December 2021.
The price rises in 2025 are being pushed through by retailers as they face what the BRC calculates will be a £7 billion increase in costs from the government’s hike to NI contributions, the rise in the minimum wage and new packaging levies.
Due to these increased costs "there is little hope of prices going anywhere but up,” said Helen Dickinson, the chief executive of the BRC.
She said the government could "take steps to mitigate these price pressures, and it must ensure that its proposed reforms to business rates do not result in any stores paying more in rates than they do already".
Next said this week it will put its prices up by 1% this year to help offset an increase in wage costs, while today Marks & Spencer was less explicit but said "there remain substantial opportunities and we are focused on what is within our control".
Analysts noted that Greggs, which also had a trading announcement today, has hiked sausage roll prices by more than 8%