UK shop prices fall again hit by discounts as stores try to clear stock

By

Barbara Santamaria

Published
Nov 1, 2017

UK prices of non-food products were down 1.5% in October, reflecting retailers’ continued discounting to battle weakening consumer demand, according to a new report.

Overall shop prices fell by 0.1% last month following the same decrease in September, but food prices increased by 2.2%, said the British Retail Consortium on Wednesday.

“Forces on inflation are pulling in both directions. On the one hand global food prices continue to head upwards at the same time as the weaker pound has left retailers facing significantly higher bills for imported goods. On the other hand, the tightening squeeze on discretionary spending power is reducing the ability of retailers to pass on increased import costs,” said Helen Dickinson OBE, Chief Executive of the British Retail Consortium.

While food inflation remains firmly in positive territory, the high levels of promotional activity pushed clothing and furniture retailers further into deflation.

“Disposable income is coming under pressure however consumers are benefitting from the continuation of promotional activity, the use of vouchers and price-cutting. This is going some way towards making up any shortfalls in spending power as cost price inflation begins to impact prices. Non-food retailers have also been combatting unseasonable weather and weakening consumer demand which means price points are being kept sharp for the season,” said Mike Watkins, Head of Retailer and Business Insight at Nielsen.

Dickinson added: “This month’s figures only serve to illustrate the enormous challenges of the current environment. And while retailers are doing their best to provide value to keep prices low for consumers who are feeling the pinch of falling real wages, in an industry where margins are already low, the capacity to absorb further cost increases is wearing thin.