UK food inflation held steady at 2% in December, although business groups continue to caution about the possibility of higher prices later in the year.
According to the Office for National Statistics (ONS), prices increased by 0.5% compared to November – mirroring the same monthly rise seen a year earlier.
The overall Consumer Price Index (CPI) inflation rate climbed to 2.5% over the 12 months leading up to December, a slight decrease from 2.6% in November.
This reduction should lessen some of the pressure on Chancellor Rachel Reeves, particularly if it persuades the Bank of England to lower interest rates next month.
Nonetheless, business groups are warning that food inflation could rise later in the year, citing government policies such as higher employer national insurance, an increase in the minimum wage, and new packaging levies.
The British Retail Consortium (BRC) claimed this morning that “inflation could rise to 4.2% this year unless the government took steps to mitigate the price pressures”.
The BRC conducted a survey of 52 chief financial officers at leading retailers, which revealed that their greatest concerns were falling demand for goods and services, inflation for goods and services, and the growing tax and regulatory burden.
When asked how they would respond to the increase in national insurance, two-thirds of those surveyed stated they would raise prices, while approximately half indicated they would reduce staff.
Last month, The Institute of Grocery Distribution (IGD) predicted that food inflation might increase to 4.9% as a result of measures introduced in the government’s budget.
ONS data indicated that the prices of fruit and sugar, jam, honey, syrups, chocolate, and confectionery saw the most significant increases. In contrast, prices for bread, cereals, and soft drinks either remained unchanged or rose at a slower rate compared to the previous year.
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