Inflation fears: UK supply chain cost pressures filter into prices

·3 min read
Inflation fears: UK supply chain cost pressures filter into prices
Empty shelves at a Sainsbury's store in Blackheath in the West Midlands. Supermarkets have urged customers not to panic buy in response to reports of emptying shelves, saying they are continuing to receive regular deliveries. The UK's biggest supermarkets described any shortages as 'patchy' across stores but said there was no need for customers to change their shopping habits. Photo: PA

Transport costs, labour shortages, commodity costs and Brexit red-tape are being blamed for an increase in costs to consumers, as inflation filters through to shop prices. 

According to the British Retail Consortium (BRC)'s monthly monitor, shop price annual deflation eased to 0.5% in September compared to August’s decrease of 0.8%. 

This is a slower rate of decline than the 12- and 6-month average price decreases of 1.4% and 0.8%, respectively and the slowest rate of decline since January 2020.

Meanwhile, non-food deflation slowed to 1.0% in September, compared to a fall of 1.2% in August. This is a slower rate of decline than the 12- and 6-month average price declines of 2.4% and 1.2%, respectively.

Following five months of deflation, food prices rose by 0.1% in September, up from -0.2% in August. This is below the 12-month average price growth rate of 0.2% and above the 6-month average price growth rate of -0.3%.

Food prices rose year-on-year for the first time in six months, and some non-food products, such as DIY & gardening, are seeing the highest rate of inflation since summer 2018.

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Other product ranges, such as furniture and electricals, have also seen annual prices rise for consecutive months, which is indicative of unresolved shipping issues coupled with high demand.

“It is inevitable that prices will continue to rise, but government intervention would minimise the impact on consumers," said said Helen Dickinson OBE, CEO of the British Retail Consortium.

"Government needs to find a long-term solution to the HGV driver shortage by expanding the size and scope of the new visa scheme for drivers from abroad so they can fill the gaps while new British drivers are trained," said Dickinson. 

"Without this, these additional burdens to what is already a precarious trading environment, will affect the British consumer and the prices they pay for the goods they want and need.”

The news comes amid a looming cost of living crisis in the UK amid inflationary pressure in many sectors, as gas and electricity prices are poised to balloon.

Benchmark natural gas prices in the UK and in Europe have tripled this year, and the rise in prices will mean higher energy costs for companies and more expensive bills for consumers.

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The surge is set to eat into the profits of several energy firms over the coming months, and pressure net profit margins which are already at their highest since 2008.

The Bank of England also last week warned that Consumer Price Index (CPI) inflation was projected to rise temporarily in the near term, to 4% in 2021 Q4, owing largely to developments in energy and goods prices. It said CPI inflation was expected to fall back to close to the 2% target in the medium term.

It warned that since the August MPC meeting, the pace of recovery of global activity has showed signs of slowing.

Watch: What is inflation and why is it important?

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