The days of shop price deflation look numbered as food inflation rose to its highest in 11 months, and non-food deflation eased significantly

According to the latest BRC-NIQ Shop Price Index, shop price inflation increased to -0.1% year on year in April, against a decline of -0.4% in March. This is above the 3-month average of -0.4%.

Non-Food inflation increased to -1.4% year on year in April, against a decline of -1.9% in March. This is above the 3-month average of -1.8%.

Food inflation increased to 2.6% year on year in April, against growth of 2.4% in March. This is above the 3-month average of 2.4%.

Helen Dickinson, Chief Executive of the BRC, said: “Everyday essentials including bread, meat, and fish, all increased prices on the month. This comes in the same month retailers face a mountain of new employment costs in the form of higher employer National Insurance Contributions and increased NLW.

“Despite price competition heating up, retailers are unable to absorb the total impact of these £5bn of employment costs and the additional £2bn costs when the new packaging tax comes into effect in October. It is crucial that poor implementation of the upcoming Employment Rights Bill does not add further pressure to costs – pushing prices further up, and job numbers further down.”

Mike Watkins, Head of Retailer and Business Insight, NielsenIQ, said: “Shoppers continue to benefit from lower shop price inflation than a year ago, but prices are slowly rising across supply chains, so retailers will be looking at ways to mitigate this as far as possible. And whilst we expect consumers to remain cautious on discretionary spend, the late Easter will have helped to stimulate sales.”

Employment Rights Bill putting “brakes on hiring”

In other news, a survey of HR Directors (HRDs) of leading retailers reveals the scale of concerns about the impact of the Employment Rights Bill.

Over 70% of retail HRDs felt the Bill would have a negative or very negative impact on their business, with fewer than one-in-ten believing it would have a positive impact.

Over half (52%) of retail HRDs suggested the Employment Rights Bill would result in a reduction in staff numbers in their business (35% unchanged; 3% increased; 10% “don’t know”). Meanwhile, 61% said that the Employment Rights Bill would reduce flexibility in job offerings (23% unchanged, 7% increase, 10% “don’t know”).

The biggest concern for HRDs is around proposals to establish rights to guaranteed hours, which risk making it much harder to offer people part-time jobs. 1.5 million of the 3 million people in retail currently work part-time, which allows them to work as much or as little as they need, and to balance work with their other life commitments.  

Costs were another concern with 52% of respondents expecting the Bill to increase prices, with none suggesting it would reduce prices for customers (26% unchanged, 23% “don’t know”). This comes just weeks after the increase in employer National Insurance Contributions and National Living Wage that together will cost retailers £5bn in the coming year. BRC already estimates that food inflation will hit 5% by the end of 2025.

Helen Dickinson, Chief Executive at the British Retail Consortium, said: “Almost 250,000 jobs have been lost in retail over the last five years and many major retailers have already announced further job cuts on the back of increased costs of employment which kicked in in April. Those in charge of retail hiring are clear – unless amended the Bill will make it even harder to keep and create jobs and reduce the flexibility that defines many existing retail roles. This matters: local, flexible retail jobs are an important stepping stone for those entering or returning to the workforce.

“Retailers agree with Government on the need to crack down on unscrupulous employers, but in its current form the Employment Rights Bill could backfire, putting the brakes on hiring, or worse still, putting retail job numbers further into reverse.

“The Government wants growth and wants to reform welfare and increase the numbers in work. We are aligned on the objectives. Now its about making sure the implementation of policies help not hinder retailers ability to provide the very jobs the economy needs. Changes to guaranteed hours proposals and ensuring government’s willingness to engage translates into meaningful changes to the current direction of travel will provide clarity so retailers can stop considering or making decisions based on worst case scenarios. Many of the amendments being debated in the Lords today would provide some of this valuable clarity, so I hope to see them supported by Peers and accepted in turn by the Government.”