UK shop prices rose slightly faster in March, with overall inflation ticking up to 1.2% year-on-year from 1.1% in February, according to new data from the British Retail Consortium (BRC).
While the increase remains modest, below the three-month average of 1.3%, retailers are warning that “storm clouds loom” as costs linked to the ongoing conflict in the Middle East begin to feed through supply chains.
The BRC’s shop price index, which tracks prices in the week of March 1-7, showed a mixed picture across categories. Food inflation eased to 3.4% from 3.5% the previous month, helped by falling dairy prices amid lower wholesale milk costs.
Fresh food inflation ticked up modestly to 4.4%, while ambient food prices slowed to 2.0%. Non-food inflation, meanwhile, edged into positive territory at 0.1%, reversing a 0.1% decline in February.
Retailers pointed to promotional activity as a factor keeping some prices in check, including discounts on alcohol, TVs, sound systems ahead of the Six Nations rugby finale, and offers on clothing and footwear to boost consumer spending.
However, Helen Dickinson, Chief Executive of the BRC, struck a cautious tone.
“Shop price inflation edged up in March, despite food inflation easing,” she said. “Higher costs resulting from the conflict in the Middle East are starting to feed into supply chains. While retailers will work with their suppliers to mitigate the impact on prices as far as possible, inflation will rise – although there are no indications it will reach the peaks of the last spike in April 2023.”
The comments come amid broader concerns over the Iran war’s ripple effects on global energy markets, shipping routes, and commodity prices. Disruptions, including impacts on the Strait of Hormuz and rising fuel and fertiliser costs, have already pushed up petrol prices at UK forecourts and are expected to filter through to food production and transportation in the coming months.
Analysts and industry groups have warned that a prolonged conflict could add hundreds of pounds to annual household shopping bills under certain scenarios.
Dickinson urged the government to consider additional pressures that could amplify price rises for shoppers, citing forthcoming healthy food regulations, potential trade changes with Europe, the Employment Rights Act, and non-commodity elements of energy bills.
Mike Watkins, head of retailer and business insight at NIQ, added that while slowing food inflation offered some relief, shoppers were becoming increasingly price-sensitive.
Non-food retailers were pinning hopes on a strong Easter trading period, but any sustained supply-chain cost increases could dampen overall retail growth.
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