UK Shop Prices Rise at Fastest Pace in Two-and-a-Half Years as Retailers Warn ‘Dam Is Starting to Break’
British shops raised their prices at the fastest pace in two-and-a-half years this month, according to new figures from the country’s main retail trade body, which warned that stores can no longer absorb the rising costs they have carried for the past two years.
The British Retail Consortium (BRC) said shop prices in October were 2.1% higher than a year earlier, the biggest annual increase since February 2024 and up from a 1.4% rise in September. The figures, based on prices collected between 1 and 7 October, land just one day before Chancellor John Healey delivers his first annual Budget on Wednesday.
“The dam is starting to break on the huge wave of costs retailers have absorbed over the last two years,” BRC chief executive Helen Dickinson said. She called on the Chancellor to lower retailers’ property taxes and employment costs in his Budget, arguing that shops have run out of room to shield customers from higher bills.
Food prices climb again
Food price inflation rose to 2.9% in October, its highest since April and up from 2.5% in September. Within that total, ambient food prices, covering store-cupboard goods such as tinned food and dried goods, rose 3.2%, their highest since September 2025 and up sharply from 2.2% in September. Fresh food inflation was unchanged at 2.6%.
The BRC said prices were being pushed up by higher transport and energy costs, as well as increases in employment costs and packaging levies. Food price inflation has, however, been slower to pick up than first predicted, and the Food and Drink Federation trade body now expects it to peak next year rather than sooner.
The shop-price figures sit alongside official consumer price inflation, which covers a wider range of goods and services and rose to an 11-month high of 3.5% in September, up from 3.1% in August. Together, the two measures suggest households are facing renewed pressure on everyday spending as winter approaches.
Non-food prices jump
Non-food inflation rose to 1.7% in October, up from 0.8% in September and its highest since December 2023. The BRC pointed to particularly sharp rises for furniture, flooring and home improvement goods, categories where retailers have faced higher import, transport and energy costs.
Bank of England Governor Andrew Bailey said earlier this month that businesses had so far largely absorbed higher energy costs caused by the US-Iran war, unlike after Russia’s invasion of Ukraine in 2022, a pattern he said had reduced the need to raise interest rates. The BRC’s latest figures suggest that cushion is now wearing thin, with more of those costs reaching the shop shelf.
The warning also follows a difficult run for retailers. Official figures published on Friday showed British retail sales fell by 0.4% in September, a larger drop than most economists polled by Reuters had expected, while a survey published the same day showed consumer confidence in October suffered its sharpest month-on-month fall since early in the Covid-19 pandemic.
All eyes on Wednesday’s Budget
Healey will deliver his first Autumn Budget on Wednesday at 12:30pm, with the Office for Budget Responsibility publishing its five-year economic and fiscal outlook afterwards. Reports ahead of the Budget suggest it will focus largely on business taxes and apprenticeships, and may also include a bank levy, while a targeted cost-of-living package is also expected.
The backdrop is challenging for the Chancellor. Borrowing costs remain at multi-decade highs, public-sector spending is at historic levels, and tax revenues are at record highs, while higher energy prices linked to the US-Iran war have eroded the fiscal headroom available at the spring forecast, estimated at around 20 billion pounds and potentially reduced to as little as 10 billion pounds.
Healey is expected to follow the fiscal rules set by former Chancellor Rachel Reeves, who pledged not to raise income tax, National Insurance or VAT. With those key revenue generators shelved for now, attention will turn to what the Budget offers businesses and households facing higher prices. For retailers, the BRC’s message is blunt: after two years of absorbing costs, the dam is breaking, and shoppers are starting to see it in prices.
