Shop prices rise amid driver shortages and Brexit red tape

UK shop prices rose last month, according to the latest data from the British Retail Consortium, in a sign that driver shortages and the costs of Brexit-induced red tape are beginning to hit household budgets.

The latest figures from the BRC and research group NielsenIQ reveal a 0.4% month-on-month rise in August. This was driven by a 0.6% rise in non-food prices, including a sharp increase in the cost of electrical goods caused by shortages of micro-chips and shipping problems.

While British shop prices remain below those in 2020, down 0.8% in August compared with the same month a year earlier, that marked a slowdown in deflation from the 1.2% year-on-year fall recorded in July.

“There are some modest indications that rising costs are starting to filter through into product prices,” said Helen Dickinson, the chief executive of the BRC, which represents hundreds of retail businesses.

“Food retailers are fighting to keep their prices down as far as possible. But mounting pressures – from rising commodity and shipping costs as well as Brexit-related red tape, mean this will not be sustainable for much longer, and food price rises are likely in the coming months.

“Disruption has been limited so far, but in the run-up to Christmas the situation could get worse, and customers may see reduced choice and increased prices for their favourite products and presents.”

The BRC’s warning comes after the toy retailer The Entertainer said prices could rise by 10% over 18 months because of supply chain disruption, labour shortages and higher transport costs. Grocery chain Iceland has also said poor availability of lorry drivers could ruin Christmas.

Dickinson called on the government to increase the number of HGV driving tests taking place, change the rules on funding for driver training and provide temporary visas for EU drivers, to help ease staff shortages which have led to gaps on shelves.

“Without government action, it will be the British consumers who will pay the price,” she said.

The indications of rising prices in the UK come as inflation across the eurozone surged to its highest level in a decade with mounting costs of energy, goods and services hitting household spending.

The statistics body Eurostat has estimated that euro area annual inflation is expected to be 3% in August, up from 2.2% in July. That is the highest level since 2011, as inflation moves sharply above the European Central Bank’s target of 2%.

Energy prices had the biggest impact on the cost of living, rising by 15.4% year-on-year in August. But other prices rose too. Non-energy industrial goods were 2.7% more costly than a year ago, suggesting the rise in raw materials is now reaching consumers. Food, alcohol and tobacco prices rose by 2%, while services cost 1.1% more than a year ago.