UK shop prices rise at fastest rate for two years
UK shop price inflation hit its highest level in two years last month, as food costs accelerated and technology prices climbed on AI-driven chip shortages, according to new industry data.
August figures from the British Retail Consortium (BRC) and research firm NIQ showed shop prices were 1.5% higher than a year earlier, up from 0.9% in July. The rise was the sharpest since February 2024, when prices rose 2.5% year on year.
Food inflation jumped to 2.5% in August, up from 2.2% in July, reversing a recent downward trend. Fresh food prices rose 3% year on year, while ambient foods — typically imported goods like canned and packaged products — saw inflation of 2.5%.
Non-food inflation also climbed, reaching 0.9% for the month, its highest level in two years. Helen Dickinson, chief executive of the BRC, said the increase reflected "the impact of higher energy, input and commodity costs... beginning to filter through into prices, particularly for ambient foods which are typically imported and processed."
Ms Dickinson also pointed to the technology sector, saying "electrical prices rose amid the ongoing AI boom, which is driving up the cost of memory chips and storage." Chip and memory shortages linked to surging demand from artificial intelligence development have pushed up costs for manufacturers including producers of laptops and other electronics, as reported by two of the outlets covering the data.
Mike Watkins, head of retailer and business insight at NIQ, said the increase was "not unexpected, particularly as some of the summer promotional activity seen in recent months comes to an end," adding that retailers were continuing to keep prices low where possible.
Ms Dickinson called on the government to address the "growing burden of business rates, packaging and employment taxes," saying that if ministers were serious about supporting growth while keeping the cost of living in check, they needed to tackle the cost of doing business.
The fresh figures come against a backdrop of broader inflationary pressures. Oil and gas price spikes linked to instability in the Middle East have been passing through into energy costs, which in turn feed into shop prices. The August data also showed rising costs for technology products, with chip and memory shortages driven by demand from the AI industry pushing up the price of electricals such as laptops.
Mike Watkins, head of retailer and business insight at NIQ, said the increase in both food and non-food inflation was "not unexpected," particularly as summer promotional activity draws to a close. "Retailers continue to keep prices low," he added.
Commenting on the figures, Ms Dickinson said: "Shop price inflation rose to its highest level in over two years, albeit well below the headline Consumer Price Index." She added that retailers were facing "persistently high operating costs" and called on the government to address the cost of doing business, "including by tackling business rates, packaging and employment taxes."
The rise in shop prices follows a recent uptick in wider inflation, driven partly by oil and gas price spikes linked to the conflict in the Middle East passing through into energy costs for households and businesses.
Andy Burnham, the Labour Party leader, said rising energy bills were "difficult for people", but stopped short of promising further government support beyond a VAT cut on energy bills. He said the government would continue to examine "how we get energy prices down" as it goes forward.