Food inflation will rise and remain above five per cent well into 2026 if the retail industry is hit by further tax rises at the Autumn Budget, a leading lobby group has warned.
The British Retail Consortium (BRC) said that the government risks ‘losing the battle’ against inflation if business rates on large shops rise as planned, the BRC said.
Business rates are the property taxes paid on commercial properties across the UK and particularly affects high street businesses. They are devolved in Scotland, Wales and Northern Ireland.
From April next year, a nationwide revaluation process will take place on business rates in England, linking payments to values in the property market from April 2024.
The levy for properties worth over £500,000 will also rise to pay for a cut for smaller businesses.
But Helen Dickinson, chief executive of the BRC, said that including large shops – like flagship stores and mega-supermarkets – in the new surtax on large properties would be the “biggest risk to food prices”.
“This would effectively be robbing Peter to pay Paul, increasing costs on these businesses even further and forcing them to raise the prices paid by customers,” Dickinson said.
Food prices are Brits’ ‘biggest concern’
The latest ONS figures put inflation at 3.8 per cent, almost double the Bank of England’s target of 2 per cent.
This was even higher for food inflation, which rose to 4.9 per cent – the highest level since the cost-of-living crisis.
Last week, the Bank of England held off from an interest rate cut amid fears that rising food prices were putting upwards pressure on headline inflation.
“The Government risks losing the battle against inflation and working families are understandably worried,” Dickinson said.
Researching from BCG has found that the British public has cut back on discretionary spending, “likely driven by higher inflation and seasonal effects”.
BCG noted that of those who said they planned to spend less on food this month, 43 per cent said this was because prices have increased so they will purchase less.
They noted falls in spending intentions among higher income groups, who typically drive consumer spending.
BCG added: “It is typical for there to be a lag between inflation rising and the public noticing the cost of items increasing.”
“This month we start to see an indication that the public is noticing higher prices.”