Getty Images
There is “little hope” that food prices will “rise elsewhere” in the second half of 2025 due to changes announced in the Budget, a retail lobby group has warned.
The costs of wage increases and National Insurance tax changes coming in April will be passed on to consumers, the British Retail Consortium (BRC) has said.
It forecasts that food price inflation will rise from 1.8% last month to 4.2% in the second half of this year, and that price increases will continue for vegetable oil, orange juice, butter and coffee. He added that overall prices in stores, which had been falling, would start to rise again.
Chancellor Rachel Reeves has previously said that “the right thing to do was to ask businesses and the richest in our country to pay a little more”.
In his October budget, Reeves said the national living wage for over-21s would rise from £11.44 to £12.21 an hour from April and that employers’ contributions to the national insurance would increase from 13.8% to 15%.
Retailers fought back, warning in November that higher wages and taxes would make job cuts “inevitable” and lead to price hikes and store closures.
On Thursday, BRC chief executive Helen Dickinson said the lobby group’s modeling, combined with forecasts from 52 finance directors, had led it to forecast much higher food price inflation in the second half of the year.
“As retailers battle £7 billion in cost increases in 2025 due to the Budget, including higher National Employers Insurance, a National Living Wage and new packaging taxes, there is little hope that prices will increase,” she said.
The lobby group said food price inflation in December was 1.8%, its lowest rate since November 2021.
The BRC uses a different basket of goods to measure inflation compared to the official figures from the Office for National Statistics, but they are broadly similar.
In the run-up to Christmas, prices fell overall in stores, but this was due to deflation of non-food goods, the BRC said.
The pace of price increases for fresh food items such as fruits and vegetables increased by 1.2%, while inflation for pantry items was 2.8%.
Retailers have warned of price increases due to budget measures.
This week Next announced it would increase prices on some clothing from April to offset an “unusually high” £73 million increase in staff wages and taxes.
Next said it expected prices to rise 1% year-on-year, which is below the current rate of inflation. Inflation in the UK rose to 2.6% in the 12 months to November, the highest level in eight months.
How can I save money on my grocery store?
Look at your cupboards to see what you already have
Head to the collapsed section first to see if it has everything you need
Buy things close to their expiration date that will be cheaper and use your freezer
Read more tips here
