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Retail industry warns: Get ready for rising prices later this year

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Customers shop for goods inside Amazon's new Amazon Fresh store in Ealing, west London
The rise could mean some of the costs may be passed on to British consumers. Photo: Niklas Halle'n/AFP via Getty Images

British consumers face higher grocery shopping bills as Brexit red tape and the commodities boom threaten to push up the cost of food.

The British Retail Consortium (BRC) warned that prices will be under pressure from high food, shipping, and commodity costs as new border checks come into force in October.

Shipping costs have increased threefold since 2019, and commodity prices are climbing, it said.

The group said retailers are not able to bear the brunt of rising cost pressures. "Global food prices are currently at their highest in seven years, shipping costs have risen threefold since 2019, and commodity prices are climbing," said Helen Dickinson, chief executive of the BRC.

The rise could mean some of the costs may be passed on to British consumers.

"We will likely see these costs filter through in the second half of this year, and with the additional Brexit red tape this autumn, retailers may be forced to pass on some of these costs on to their customers," Dickinson added.

Watch: How to save money on a low income

Read more: Brexit-supporting Wetherspoon boss calls for more immigration to plug staff shortages 

It came as the BRC-NielsenIQ Shop Price Index said shop prices fell by 0.6% in May, compared with a 1.3% decrease in April — the slowest rate of decline since February 2020.

However, while food prices continued to decline in May, the UK economy's reopening and pent-up demand provided a cushion, the BRC said.

Food prices dropped 0.3% in May compared with a year earlier and a 0.6% fall in April, while non-food prices declined 0.8% on last year, compared with a 1.7% drop a month ago.

Fresh food prices declined for the sixth month in a row in May, although deflation slowed to 1% in May, compared with 1.5% in April.

"With high-street retailers continuing to offer price reductions and supermarkets promoting seasonal food and drink, this is helping to offset cost-of-living increases," said Mike Watkins, head of retailer and business insight at NielsenIQ.

"Consumers will be seeing the impact of higher energy and fuel costs in household bills and while some cost price increases are coming through the supply chain, this is not yet enough for shop price inflation to return."

Meanwhile, furniture and electrical prices rose in May due to the lingering effect of global supply chain disruption earlier this year, partly caused by the Suez Canal blockage and shipping container shortages.

In March, B&Q owner Kingfisher (KGF.L) said it was "committed" to staying competitive on pricing after costs for timber copper rose to a 10-year high.

The rise of shed offices and "a new generation of DIY'ers" that has emerged during the COVID-19 pandemic boosted sales at B&Q.

Watch: What UK government COVID-19 support is available?

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