British retail prices experienced a modest acceleration in March, according to a monthly survey by the British Retail Consortium (BRC). Shop price inflation rose to 1.2% in the 12 months to March, up from the 1.1% recorded in February, though the figure remained under the three-month average of 1.3%.
BRC Chief Executive Helen Dickinson said the conflict in the Middle East is adding to cost pressures across supply chains. "Higher costs resulting from the conflict in the Middle East are starting to feed into supply chains. While retailers will work with their suppliers to mitigate the impact on prices as far as possible, inflation will rise," she said.
The BRC provided further detail on the composition of shop price changes and factors shaping retailers' cost bases:
- Food inflation was 3.4% on an annual basis in March, a slight easing from 3.5% in February, driven in part by falling dairy prices.
- Prices for non-food items increased by 0.1% over the year to March, after a 0.1% fall in the 12 months to February.
- The BRC noted that potential new labour market legislation and laws targeting healthier foods could raise operating costs for retailers and exert upward pressure on prices.
The survey period ran from March 1 to March 7. The BRC noted the timing came shortly after the U.S.-Israeli attacks on Iran began, a sequence it said is contributing to higher supply-chain costs.
Monetary policy watchers are attentive to food price developments because the Bank of England views food costs as influential on public inflation expectations. The BRC highlighted that such expectations rose to their highest level since 2023 in March, reinforcing why food prices remain under scrutiny.
Overall, the data point to a slight pickup in shop price inflation in March with food prices and geopolitical-driven supply-chain pressures cited as key influences. Retailers are attempting to work with suppliers to limit price effects, but the BRC cautioned that these cost channels are likely to lift inflation.