UK Retailers Experience Largest Drop in Shop Prices in Three Years

UK retailers have reported a significant decline in shop prices, marking the steepest drop in three years as unseasonably wet weather in September led to extensive discounts aimed at attracting shoppers. According to the latest data from the British Retail Consortium (BRC) and NielsenIQ, shop prices fell by 0.6% year-on-year, a notable increase from the 0.3% decrease recorded in August. This decline represents the sharpest drop since August 2021.

Helen Dickinson, chief executive of the BRC, stated, “September was a good month for bargain hunters as big discounts and fierce competition pushed shop prices further into deflation.” She highlighted that non-food categories, particularly furniture and clothing, experienced the largest price drops as retailers worked to entice hesitant shoppers back into stores.

While the easing of price inflation is welcomed by consumers, Dickinson warned that geopolitical uncertainties, climate change, and government-imposed costs could potentially reverse this positive trend in the future.

In the non-food sector, prices plummeted by 2.1% year-on-year, a more pronounced decrease than the 1.5% drop recorded in August and the lowest rate since March 2021. Conversely, food inflation saw a slight uptick to 2.3%, primarily due to poor harvests in key producing regions that drove up prices for cooking oils and sugary goods.

Mike Watkins, head of retailer and business insight at NielsenIQ, noted that the deflation in non-food prices would aid shoppers in managing their household budgets for the remainder of the year. However, he emphasized that retailers must continue to offer attractive promotions as they approach the busy festive season.

Official data has shown that retail sales volumes rose by 2.5% in August, exceeding expectations and marking the strongest growth since July 2022. The Office for National Statistics attributed this increase to higher spending on food, clothing, footwear, and household goods, buoyed by warm weather and end-of-season sales.

Ahead of the upcoming budget on October 30, Dickinson urged Chancellor Rachel Reeves to address the “disproportionate tax burden” faced by physical retailers compared to their online counterparts. She advocated for the introduction of a 20% retail rates corrector to level the playing field, enabling brick-and-mortar stores to continue offering competitive prices, protect jobs, and stimulate investment in the sector.