The latest Consumer Price Index (CPI) inflation figures, issued in July 2023, reveal a decline in headline inflation to 7.9% and in food inflation to 17.3%. In response to these numbers, Helen Dickinson, Chief Executive of the British Retail Consortium (BRC), commended retailers for their efforts in curbing price rises and reducing inflation.
Food inflation has seen a decline for the third consecutive month. This downward trend can be attributed to lower commodity costs and cheaper energy prices, which have enabled retailers to pass on the benefits to consumers.
Prices of items such as cheese, fruit, and fish have decreased due to lower commodity costs and cheaper energy prices. Non-food items such as children’s clothing, household textiles and domestic appliances have also experienced drops in price, thanks to increased summer discounting.
Supply chain volatility raises concerns
While falling inflation rates are good news, the BRC emphasises that supply chains remain volatile. The recent decision by Russia to withdraw from the Black Sea grain initiative [an agreement permitting the export of food and fertiliser from three Ukrainian ports during the war resulting from Russia’s invasion of Ukraine] could potentially impact the cost of certain staple products in the future.
This development raises concerns for retailers as they strive to maintain stable pricing for consumers. Despite the current decrease in inflation rates, the unpredictable nature of supply chains underscores the need for continuous vigilance in managing costs and ensuring product availability.
Government intervention and cost pressures
Helen Dickinson emphasises that retailers are playing their part in reducing inflation. However, she urges the government to contribute by re-evaluating its role in bringing down inflation.
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The upcoming implementation of the deposit return scheme and reformed packaging levy, known as “extended producer responsibility,” could impose an additional £4 billion in costs on retailers – a burden that would place renewed pressure on prices.
Dickinson calls on the government to reconsider the timelines for these interventions, especially in light of the costs arising from Windsor framework labelling [post-Brexit measures designed to smooth trade throughout the United Kingdom] and the imminent increases in business rates.
By doing so, the government could alleviate financial strain on retailers and mitigate any potential adverse effects on consumer prices.
By adopting measures to control price rises, retailers have successfully contributed to the recent decline in inflation rates, benefitting consumers. But challenges persist due to the volatility of supply chains, and these could impact the future cost of essential goods.
The BRC also urges the government to reconsider the implementation timelines for new interventions, as they could impose significant costs on retailers and potentially lead to price increases.
Collaborative efforts between retailers and the government are crucial to maintaining stable prices and ensuring the well-being of both businesses and consumers.