Retail prices dropped 1% last month, but the British Retail Consortium (BRC) has warned that rising inflationary pressures in 2025 will soon reverse this trend, with food and non-food prices set to increase.
The latest BRC-NielsenIQ Shop Price Index found that retailers relied on heavy discounting to close out 2024, but warned that rising costs —driven by higher taxes and new packaging levies— are expected to push prices higher in 2025.
The December report, which captures data from 1-7 December, shows non-food prices were in deflation at 2.4%, a slightly deeper drop than the previous month. This was largely due to the timing of Black Friday, which pushed significant discounting into this data period, making non-food price deflation appear more pronounced than the broader underlying trend.
Meanwhile, food inflation remained steady at 1.8%, with fresh food inflation holding at 1.2%, while ambient food inflation rose slightly to 2.8%.
However, the BRC caution that these relatively stable figures could soon give way to sharper price hikes as retailers face a projected £7bn increase in costs due to higher wages, taxes, and other external factors.
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BRC CEO Helen Dickinson said: “Retailers discounted heavily for Black Friday this year as they attempted to make up for weaker sales earlier in the year. However, the later Black Friday timing brought many of the non-food discounts into the measurement period, making non-food prices look more deflationary than the underlying trend. With food inflation bottoming out at 1.8%, and many price pressures on the horizon, shop price deflation is likely to become a thing of the past.
“As retailers battle the £7bn of increased costs in 2025 from the Budget, including higher employer NI, National Living Wage, and new packaging levies, there is little hope of prices going anywhere but up.
“Modelling by the BRC and retail CFOs suggest food prices will rise by an average of 4.2% in the latter half of the year, while Non-food will return firmly to inflation. Government can still take steps to mitigate these price pressures, and it must ensure that its proposed reforms to business rates do not result in any stores paying more in rates than they do already.”
NielsenIQ head of retailer and business insight Mike Watkins added: “During December, shoppers benefited from both lower inflation than last year and bigger discounts as both food and non-food retailers were keen to drive sales after a slow start to the quarter. However, higher household costs are unlikely to dissipate anytime soon so retailers will need to carefully manage any inflationary pressure in the months ahead.”
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