Shop price inflation has returned to the UK’s high streets, with overall shop prices rising 0.4% year on year in June 2025, reversing the -0.1% decline seen in May.
The figures, released by the British Retail Consortium (BRC) and NielsenIQ, reveal mounting cost pressures are translating into higher prices at the tills, particularly in food categories, as retailers grapple with increased government-imposed costs.
Food inflation surges on meat and produce costs
Food price inflation accelerated to 3.7% in June, up from 2.8% the previous month. Fresh food rose 3.2% year on year, with prices of meat especially affected by elevated wholesale costs and higher wages driven by April’s National Living Wage increase.
Fruit and vegetable prices also climbed, attributed to hot, dry weather conditions that reduced crop yields across parts of the UK and Europe.
Helen Dickinson, Chief Executive of the BRC, said retailers are struggling with “high wholesale prices and more expensive labour costs,” which are pushing food prices higher. She warned that geopolitical tensions and climate-related events could lead to “a significant rise in food inflation by the end of this year.”
Meanwhile, ambient food inflation, which covers products with longer shelf lives, reached 4.3% in June, up from 3.3% in May, outpacing the three-month average of 3.8%.
These figures highlight persistent cost pressures that continue to feed through the supply chain.
Non-food deflation slows despite consumer spending boost
In contrast, non-food prices remained in deflation at -1.2% year on year in June, though the rate of decline slowed compared with -1.5% in May.
Retailers have been discounting products in categories like DIY and gardening to attract customers eager to take advantage of recent sunny weather.
Mike Watkins, Head of Retailer and Business Insight at NielsenIQ, noted that while warmer weather is helping to drive footfall and sales, “rising prices could become a concern if consumer willingness to spend declines later in the year.”
He added that retailers will likely need to reinforce value-for-money messaging to maintain shopper engagement over the coming months.
Non-food retailers’ efforts to stimulate demand reflect broader caution about consumers’ spending power as essential costs, including food, energy, and housing, continue to rise faster than wages for many households.
Government urged to act as costs pile up for retailers
Retail industry leaders have pointed to increased Employer National Insurance contributions and the higher National Living Wage introduced in April as key factors behind the return of inflation in shop prices.
According to the BRC, these additional costs, set out in last autumn’s Budget, have weighed heavily on businesses within just three months of implementation.
Dickinson stressed the importance of upcoming government decisions, saying, “To limit further rises, Government must find ways to alleviate the cost pressures bearing down on retailers.
The upcoming business rates reform offers such an opportunity, and the Government must ensure no shop pays more as a result of the changes.”
Retailers are also concerned that geopolitical instability and climate-related events could further disrupt supply chains, pushing prices higher.
The combined effect of these pressures could prolong the period of elevated shop price inflation, affecting consumers’ purchasing power into the second half of 2025.
