Stock - London Economy / uk
The rise in shop prices is playing into wider UK inflation, which some analysts are predicting could top 22 per cent in 2023. Image Credit: AP

Prices in British shops rose at the highest rate since at least 2005 this month as Britons battled soaring costs on everything from gasoline to crisps.

The British Retail Consortium said shop price inflation accelerated to 5.1 per cent in August, a new record for the index which was started in 2005, and up from 4.4 per cent in July. Food price increases hit 9.3 per cent with milk, margarine and crisps seeing the biggest rises. This level of food inflation could continue for at least another six months, according to NielsenIQ, which produces the data for the BRC.

Shoppers are doing everything they can to save money at the checkout, including opting for discount supermarkets, choosing own-brand products and buying less food. Britons are preparing for a recession that will potentially last more than a year and for soaring energy bills, all while a leadership contest plays out to decide who’ll succeed Boris Johnson as prime minister next week.

“As retailers also grapple with growing cost pressures, there is only so much they can shoulder,” said Helen Dickinson, chief executive of the BRC. “The new prime minister will have an opportunity to relieve some of the cost burden bearing down on retailers, like the upcoming increase in business rates, in order to help retailers do more to help their customers.”

The rise in shop prices is playing into wider UK inflation, which some analysts are predicting could top 22 per cent in 2023, the BRC said.

In a rare boost for shops, the recent bank holiday weekend in the UK brought some respite with customer traffic across all retail destinations rising by around 5 per cent compared to the weekend before, according to data company Springboard. Restaurants saw a 8 per cent increase in transactions, as Britons enjoyed dining out with friends and family, Barclaycard data show.

Still, price increases remain the biggest concern for 70 per cent of businesses as confidence among companies declined to the lowest levels since March 2021, according to another report released by Lloyds Banking Group Plc on Wednesday. Outlooks by British retailers dropped 18 points from July, seeing the largest slump among the four sectors surveyed by the bank.

“With inflationary pressures growing, businesses will no doubt be looking to their supply networks along with tight control of costs and profit margins where they can,” said Paul Gordon, managing director for SME and mid corporates at Lloyds. “We know that rising costs are already dealing a heavy blow to businesses, but remaining agile to the changing economic environment will be vital for businesses in the months ahead.”