BRC: UK store prices fall at slower pace as tax hike expectations bite

According to the British Retail Consortium (BRC), UK store prices fell by 0.4% year-on-year in March, down from a 0.7% drop in February.

BRC chief executive Helen Dickinson said the slowdown in price decrease was due to expectations of higher costs ahead, as the UK is set to increase employers' social security contributions from April 6. These changes were first announced by Finance Minister Rachel Reeves in her October budget. Dickinson warned that, combined with other rising business costs, this will likely lead to higher prices and accelerating inflation in the UK over the coming months.

In the UK, food prices have risen by 2.4% over the past year, while drinks costs have also edged up, driven by higher duties and global sugar prices. In contrast, clothing and footwear saw sharp deflation amid persistently weak consumer demand, according to the BRC's data.

Meanwhile, as reported by Reuters, the Bank of England is carefully assessing the inflationary impact of these measures and the implications for future interest rate cuts. Earlier, the financial regulator had signalled plans to hold the cost of borrowing steady.