Shop Prices are Still Falling (and So are High Street Businesses)

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Shop prices are falling, but the BRC warns that unless the government reforms the tax system, more businesses will go to the wall.

It's good news for consumers from the British Retail Consortium (BRC) reports that prices in Britain's stores fell 0.6% in the year to September as the pace of deflation accelerated from August's -0.3%.

This is below the three-month average rate of -0.3% and shop price annual growth is now at its lowest rate since August 2021.

"September was a good month for bargain hunters as big discounts and fierce competition pushed shop prices further into deflation," says Helen Dickinson, Chief Executive of the BRC.

"The BRC data confirms a trend of disinflation remains intact. We are also seeing a steady improvement in overall confidence amongst consumers," says Lori Patterson, an industry expert at NoDepositBonus.guide.

However, the deflationary pressures are only apparent in the non-food category (-2.1% in September), and households will pay more for food (up to 2.3% in September, up from 2.0% in August).

"Food inflation edged up slightly as poor harvests in key producing regions led to higher prices for cooking oils and sugary products<' says Dickinson.

Although shoppers will welcome the news of falling prices, Dickinson warns the retail industry remains under significant pressure.

She warns ongoing geopolitical tensions, climate change, and government-imposed regulatory costs could all reverse the deflationary trend.

Dickinson explains retail faces a disproportionate tax burden compared to other industries and she calls on the Government to take decisive action in the upcoming Budget.

The BRC advocates for the introduction of a 20% Retail Rates Corrector - a 20% adjustment to bills for all retail properties - "to level the playing field".

"This will allow retailers to continue to offer the best possible prices to their customers while opening shops, protecting jobs and unlocking investment," says Dickinson.

The BRC says retail pays 7.4% of all business taxes (£33BN), a share 1.5 times greater than its share of the overall economy (5% GDP).

This bill amounts to 55% of the industry's pre-tax profits, the highest proportion, along with hospitality, of all main business sectors. Of this total tax bill, 11% of profits is made up of business rates, the highest of all business sectors

The BRC warns that without action, up to 17,300 shops could close over the next decade.

Ahead of the election, the Labour Party indicated it wants to reform the tax system to make it "fairer for bricks and mortar businesses."

Although Labour has taken office, it is yet to indicate it will make it easier for high street businesses. Instead, Chancellor Rachel Reeves has said she intends to raise taxes in the upcoming budget announcement while also showing no inclination to extend some of the current tax breaks that are in place for the struggling hospitality sector.

The BRC says the UK has lost 6,000 shops in the last five years: in two-thirds of these closures, business rates had a material impact in the decision-making process.