UK food inflation “steady” but Brexit concerns continue to overwhelm retailers

03 Jul 2019 --- UK shop prices have turned deflationary for the first time since October 2018, falling by 0.1 percent, according to the British Retail Consortium (BRC)-Nielsen Shop Price Index for June 2019. Although the head of the BRC recognizes the slight dip as a relief for consumers who have faced several months of inflation, Chief Executive Helen Dickinson warns that a no-deal Brexit would hinder retailers’ abilities to continue to contain prices, as checks and delays would raise the cost of doing business.

“Shop prices fell for the first time since October 2018. While the overall fall in prices was small, and food inflation remains steady, it nonetheless represents a welcome break for consumers. It is also a sign of the fierce competition between retailers, which has long kept prices low for British consumers,” Dickinson says. 

It would be extremely difficult for retailers to contain prices if the UK were to leave the EU without a deal, she urges, as the UK food and retail industry is enormously susceptible to the trading challenges that a no-deal Brexit presents – something which industry has dubbed a “looming catastrophe.”

Despite the Brexit deadline being pushed further down the road to October 31 from the original March 29 exit date and the current race for the UK’s next Prime Minister continuing, very little has changed for UK food businesses and retailers who are increasingly concerned over the growing threat of a no-deal scenario. 

Click to EnlargeA clear way forward that secures a robust trade agreement between the UK and Europe is what the UK food and beverage industry continue to vigorously pursue.“The October 31st deadline also comes at the worst possible time for retail – the height of preparations for Christmas and Black Friday, which are peak trading periods, threatening to cause disruption for consumers and businesses, and making further stockpiling of goods almost impossible. It is vital that the next Prime Minister reaches a deal with the EU and avoids the cliff edge,” Dickinson adds. 

BRC–Nielsen Shop Price Index for June 2019
Food inflation was steady at 1.8 percent in June. This is in line with the 12-month average price increase and slightly below the six-month average price increase of 1.9 percent. 

Fresh Food inflation also eased last month to 1.4 percent from 1.5 percent in May. This is in line with the 12-month average price increase, but below the six-month average price increase of 1.5 percent.

Ambient Food inflation accelerated to 2.3 percent, up from 2.1 percent in May. This is in line with the 12-month average price increase, but below the six-month average price increase of 2.4 percent. 

With Food inflation steady, June’s headline inflation figure was driven by the sharp decline in Non-Food prices. Out of the seven Non-Food index categories, inflation eased for four of them and the remaining three were deflationary.

UK shoppers’ finances have been under significant strain for some time. Real income grew by just 1.1 percent over the year to April 2019, whereas there was negative real wage growth in six of the last nine years.

A clear way forward that secures a robust trade agreement between the UK and Europe is what the UK food and beverage industry continue to vigorously pursue. However, as the countdown continues and there is still no clarity on the way forward, a no-deal scenario is looking more likely than ever. 

Meanwhile, the country’s food and drink industry is also asking the government to get behind them to ensure a dynamic and competitive sector. Last month, more than 30 organizations from across the UK’s food and drink supply chain joined forces to publish a “call to action” urging Government to champion Britain’s largest industry, which contributes £121 billion (US$154bn) to the economy. 

The collaboration and consequent publication – “A Recipe for Growth, Prosperity and Sustainability” – makes a series of proposals, including creating a dedicated trade policy for UK food and drink. 

By Gaynor Selby 

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