UK shoppers caught a small break in February as shop price inflation eased to 1.1% year-on-year, down from 1.5% in January, according to the British Retail Consortium (BRC). Retailers rolled out promotions across health, beauty, and fashion to keep prices in check, and it worked. Month-on-month, shop prices didn’t budge at all. Don’t pop the champagne just yet, though. Retailers are warning that rising employment costs could squeeze margins and push prices back up later in the year.
Inflation Is Easing — Here’s the Breakdown
Food prices are still rising, but the rate is coming down. Overall food inflation dropped from 3.9% in January to 3.5% in February. Fresh food inflation edged slightly lower too, from 4.4% to 4.3% year-on-year.
The real standout? Ambient food — your tinned goods, cereals, pantry staples — saw inflation fall from 3.1% to 2.3%, its lowest level in four years. Falling global food commodity prices are filtering through to supermarket shelves, and shoppers are starting to feel it.
BRC Chief Executive Helen Dickinson put it simply: households got some welcome relief, with fierce retail competition helping keep a lid on price rises.
Why Retailers Are Still Nervous
Lower inflation sounds great on paper, but UK retailers are operating on razor-thin margins and the pressure isn’t letting up.
Labour’s Employment Rights Act and associated tax rises are pushing up employment costs significantly. Last month, CFOs at several major UK retailers warned they may have to cut working hours or reduce headcount to absorb the impact. Dickinson cautioned that if the secondary legislation tied to the Act is implemented without careful consideration of business costs, it could quickly feed back into higher prices for consumers.
In short: what the supermarket giveth, the tax bill may taketh away.
What Consumers and Retailers Can Expect Next
Consumer demand remains unpredictable. Mike Watkins of NIQ noted that poor weather and weak consumer sentiment are making it difficult for retailers to plan — even as cost-of-living pressures begin to ease slightly.
The outlook depends on a few moving parts: whether global commodity prices stay low, how quickly employment cost pressures bite, and whether shoppers feel confident enough to spend. For now, it’s cautious optimism all round.
The Bottom Line
UK shop price inflation is heading in the right direction, and February’s figures offer genuine relief for stretched household budgets. But the structural cost pressures facing retailers — from employment law changes to ongoing tax rises — mean this is a fragile improvement rather than a sustained trend. Keep an eye on food prices through spring for a clearer picture.
Want to stay on top of the UK’s cost-of-living story? Subscribe to The MJBurrows Briefing for your weekly economic update.
FAQs
Q1: What is UK shop price inflation right now?
A: UK shop price inflation stood at 1.1% year-on-year in February, down from 1.5% in January, according to the BRC. Month-on-month, prices were flat.
Q2: Why are food prices still rising if inflation is easing?
A: Food inflation is slowing but hasn’t reversed — overall food prices were still up 3.5% year-on-year in February. Fresh food in particular remains elevated, though the rate of increase is gradually declining.
Q3: How are retailers responding to rising employment costs?
A: Several major UK retailers have warned they may reduce working hours or cut jobs to manage the higher costs stemming from Labour’s Employment Rights Act and recent National Insurance changes.
Q4: What is ambient food inflation?
A: Ambient food refers to shelf-stable products kept at room temperature — think tinned goods, cereals, and condiments. This category saw the sharpest inflation drop, falling to 2.3% in February, its lowest in four years.
Q5: Will shop prices keep falling in 2026?
A: That depends on global commodity prices and the impact of rising employment costs on retailers’ margins. The current trend is encouraging, but cost pressures from new employment legislation could limit further relief later in the year.
DISCLAIMER
Effective Date: 15th July 2025
The information provided on this website is for informational and educational purposes only and reflects the personal opinions of the author(s). It is not intended as financial, investment, tax, or legal advice.
We are not certified financial advisers. None of the content on this website constitutes a recommendation to buy, sell, or hold any financial product, asset, or service. You should not rely on any information provided here to make financial decisions.
We strongly recommend that you:
- Conduct your own research and due diligence
- Consult with a qualified financial adviser or professional before making any investment or financial decisions
While we strive to ensure that all information is accurate and up to date, we make no guarantees about the completeness, reliability, or suitability of any content on this site.
By using this website, you acknowledge and agree that we are not responsible for any financial loss, damage, or decisions made based on the content presented.
