UK shop price deflation slowed to 0.7% in January 2025, improving from the 1% deflation recorded in December 2024, according to the latest British Retail Consortium (BRC) – NielsenIQ Shop Price Index. The figure is also slightly better than the three-month average deflation rate of -0.8%.
Non-Food Deflation Improves
Deflation in the non-food sector stood at -1.8% in January, improving from -2.4% in December and slightly better than the three-month average of -2%. The change suggests that January sales and post-holiday discounts helped retailers move excess inventory.
Food Inflation Slows Down
Food prices remained inflationary but showed signs of slowing:
- Overall food inflation: Dropped to 1.6% in January from 1.8% in December.
- Fresh food inflation: Declined to 0.9% from 1.2% in December, slightly below the three-month average of 1.1%.
- Ambient food inflation: Fell to 2.5%, the lowest level since February 2022, down from 2.8% in December.
BRC Warns of Rising Costs Ahead
Helen Dickinson, CEO of the British Retail Consortium, noted that while overall prices fell in January, the pace of deflation is slowing. She highlighted key trends:
“Extensive January sales were good news for bargain hunters, especially in furniture and fashion. However, rising costs could soon lead to price increases.”
Dickinson warned that several factors could drive prices higher:
- £7 billion in new costs introduced in the last UK Budget.
- Higher National Insurance Contributions (NICs) for employers.
- An increase in the National Living Wage.
- The introduction of a new packaging levy.
Retailers Call for Government Support
Dickinson urged the government to ensure that proposed business rate reforms do not lead to higher costs for retailers:
“Without action, UK households will feel the effects. The government must ensure business rate changes do not push store costs even higher.”
Conclusion
While January’s retail price deflation provided short-term relief for consumers, economic pressures and regulatory costs could reverse this trend in the coming months. Retailers and shoppers alike are bracing for potential price increases across multiple categories.
