UK Shop Price Inflation Hits 14-month Low Despite High Cost of Imported Goods

Inflation drops due to supermarkets lowering prices and food price growth, yet retailers warn of limited ability to control future price increases amidst rising business rates.

• The UK's shop price inflation has dropped to a 14-month low at 5.2% in October, down from 6.2% the previous month, largely driven by supermarkets like Tesco and Sainsbury's reducing prices to compete with discount chains Aldi and Lidl.
• Food price growth fell from 9.9% to 8.8%, primarily owing to reductions in domestic fruit prices, with fresh food inflation reaching its lowest point since July 2022.
• However, retailers warn that their ability to control future price rises may be limited in light of rising business rates and a forthcoming increase in the business rates tax, with advisory group Altus predicting gross business rates in England will rise by £2 billion in April next year.
• Retailers, along with pubs, hospitality, and leisure businesses are facing steep increases in tax bills next year, with the BRC warning that without government intervention, an additional £470m per year would be added to retailers' business rates, potentially increasing consumer prices.
• While inflation measures appear to be easing across a range of goods, high costs for imported goods driven by a weaker pound, high production costs and emerging trade frictions remain a challenge, leading to an uneven inflation landscape across different product categories.

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