UK’s retailers struggle with price inflation

 
Julian Harris
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SHOPS are battling the effects of rising inflation, the British Retail Consortium (BRC) announced today.

Shop price inflation hit 2.1 per cent last month, the group said, up from two per cent in November.

The rate will concern consumers, but is “well below the wider consumer price index” (CPI) as retailers absorb the effects of rising prices, said the BRC’s Stephen Robertson.

Competitive pressures have prevented companies from passing the full impact of price rises on to customers, recent surveys reveal.

“Due to upward pressure on cost prices, retailers have had to work even harder to encourage cash-strapped customers to keep shopping,” added Mike Watkins of research group Nielsen.

In November, CPI inflation reached 3.3 per cent in the UK, and is expected to hit four per cent in the next three months, according to ING.

And across the Eurozone inflation has surpassed the two per cent target rate, jumping to 2.2 per cent as global commodity prices rise.

Retailers’ food prices increased by four per cent in December, the BRC said. Despite rocketing global food prices, food inflation in shops remained the same as November’s rate.

Last week global food prices reached a record high, particularly in sugar, edible oils, and some cereals, the United Nations revealed.

Adverse weather is largely to blame, according to agricultural economist Douglas Southgate of Ohio State University.

Drought has struck Brazil, as well as the wheat growing regions of Russia and Ukraine, while huge floods have destroyed areas of Australia.

“And when a country bans commodity exports, as Russia did last year and more than three dozen nations did in 2008, it can drive global prices even higher,” Southgate warned.

Meanwhile, petrol prices have surged further in the UK, approaching £1.30 a gallon.

“The country’s small businesses are not just hard-hit by the recent VAT rise, but also by record high fuel prices which has come at the most fragile of times,” said John Walker of the Federation of Small Businesses.