Retailers are warning customers that food prices are going to increase in the second half of 2025 due to changes announced in the budget.
The British Retail Consortium (BRC) warned that rising wages and National Insurance coming in April will be passed onto consumers, meaning “there is little hope of prices going anywhere but up”.
In the October Budget, Chancellor Rachel Reeves said the National Living Wage for over 21s would increase from £11.44 to £12.21 an hour from April and that employers’ National Insurance contributions would rise from 13.8% to 15%.
The BRC forecast food price inflation would rise from 1.8% last month to 4.2% in the latter half of this year, as well as overall shop prices rising again, despite a recent fall.
However the Treasury stated that the independent Office for Budget Responsibility had forecast that food inflation would stay below 2.2% in 2025.
Previously, Reeves said: “The right thing to do was to ask businesses and the wealthiest in our country to pay a bit more”.
Retailers hit back at the changes in October, saying they would increase prices, cut jobs, and close shops in response to the rise in taxes and wages.
In a Christmas trading update on Thursday, Marks & Spencer said the outlook for economic growth, inflation, and interest rates, were “uncertain”, adding it “faces higher costs from well-documented increases in taxation”.
But the retailer added it had a successful Christmas period, with like-for-like food sales rising by 8.9%.
Chief Executive of the BRC, Helen Dickinson, said, “Modelling by the BRC and retail CFOs suggest food prices will rise by an average of 4.2% in the latter half of the year, while Non-food will return firmly to inflation.”
However the Treasury said food inflation had “fallen from a peak of 19.6% under the previous government to just 1.9%”.
It said that the Labour government was “now focused on putting more money in people’s pockets by growing the economy”.