British shoppers could soon encounter big price hikes on the high street as efforts to counter post-Brexit vote currency fluctuations come to an end.
Prices of non-food products, such as electricals, continued to fall but at the slowest pace since April 2013, down 1.3 percent, new figures revealed on Wednesday.
The Neilson Shop Price Index found food prices increased by 1.3 percent in August compared with the same month last year, a slight increase on July.
A perfect storm of post-Brexit vote currency fluctuations, which saw the value of sterling against the dollar and Euro plummet, and increased costs such as wages, have piled on pressure.
And for many stores, planning efforts to bet against changes in the currency rates, called hedging, will now be coming to an end.
Richard Lim, Chief Executive, Retail Economics said the figures suggested the challenge for retailers would get worse in the months to come.
“Cost pressures come from sourcing costs and operating costs. We have seen the fall in sterling last year is continuing to feed through on sourcing.
“We think consumer prices will peak later this year, caused by the Brexit vote and markets factoring this in, but also other cost pressures we’re seeing.
“The higher minimum wage, the rise of rents in prime areas, and retailers going through these at the same time as consumer demand lowers.”
Helen Dickinson, chief executive of the British Retail Consortium, said: “Non-food retailers are running out of options for protecting shoppers from the significant increases in the price of imported goods since the EU referendum in June last year.
“We expect Non-Food prices to continue trending towards year on year inflation.”
Mike Watkins, Head of Retailer and Business Insight, Nielsen said: Food inflation continues to be kept in check by lower increases in fresh and seasonal foods and as fresh is typically over 40% of the shopper spend in supermarkets, this is helping to offset the rising cost of living in household bills.
“Whilst consumer sentiment is on the turn and shoppers are becoming cautious about spending on big ticket items, prices are still very competitive on the high street and spend on food and drink has been strong over the summer, albeit disrupted by the changeable weather in August.”
The British Retail Consortium also warned today that the quality and price of goods sold in Britain would be adversely affected if a strong deal on customs controls was not secured after Brexit.
“We want to work with the Government to develop a system which works for consumers, so that there’s no difference in terms of the availability of affordable, quality products when they make purchases or visit stores post-Brexit,” Dickinson said.