UK food inflation has increased for the fourth month in a row, reaching an annual rate of 2.8% in May, according to the British Retail Consortium (BRC). The latest rise is largely attributed to higher fresh produce costs, especially red meat, amid mounting pressure on retailers from tax and wage-related cost increases.
Although overall shop prices remained in deflation at -0.1% year-on-year, unchanged from April, the upward trend in food prices highlights the growing challenges facing consumers. The divergence between food and non-food pricing is becoming more evident, as prices of non-food items continued to decline, particularly in categories such as electronics.
Food Prices Surge as Inflation Hits One-Year High
The latest BRC-NielsenIQ Shop Price Index confirmed that the annual rise in fresh food prices reached 2.4%, up from 1.8% the previous month.
Among these, wholesale beef prices have been a key driver, leading to higher prices for steak and other red meats on supermarket shelves. This rise contributed significantly to the overall food inflation rate hitting its highest level since May 2024, according to BRC data.
Ambient food inflation, which covers shelf-stable products such as tinned goods, eased slightly from 3.6% in April to 3.3% in May. This shift indicates a growing disparity within the food sector itself, as fresh produce becomes increasingly expensive while other categories stabilise.
Helen Dickinson, Chief Executive of the BRC, noted: “Fresh foods were the main driver, and red meat eaters may have noticed their steak got a little more expensive as wholesale beef prices increased.”
Retailers Absorb £5bn in Extra Costs Amid Continued Non-food Deflation
While food prices are rising, the cost of non-food goods declined by 1.5% compared with May 2024. Categories such as fashion and furniture saw a slowdown in promotional activity, while electricals experienced accelerated price cuts as retailers attempted to stimulate demand before potential trade disruptions linked to US tariffs.
Retailers are also managing significant structural cost pressures, including a £5 billion increase in employer national insurance contributions and the impact of a higher national living wage, both effective since April.
A further £2 billion in packaging-related taxes is set to take effect later this year, raising concerns about the sustainability of current pricing strategies.
According to the BRC, the compounding costs are placing the sector under strain, potentially limiting the ability of retailers to continue absorbing price increases without passing them on to consumers.
Mike Watkins of NielsenIQ added: “Whilst shoppers are seeing savings at the checkout as retailers increase promotional activity, increasing prices is still an extra challenge to consumer spending alongside rising household bills”
