Food inflation 'to hit 6% by Christmas' in major blow to household budgets

Some 56 per cent of retail finance chiefs – representing more than 9,000 stores – are “pessimistic” about trading conditions over the next 12 months, a survey by the BRC found.

And David Lonsdale, director of the Scottish Retail Consortium, warned there were consequences for the viability of stores, staffing levels, and prices charged to customers.

Some 85 per cent told the BRC their businesses had been forced to raise prices as a consequence of the previous budget’s raising of employer national insurance and the national living wage. Two-thirds (65 per cent) predicted further rises in the coming year.

The BRC, whose figures now put food inflation at 4 per cent, said prices would reach 6 per cent higher year on year by Christmas. The consortium said: “This will pose significant challenges to household budgets, particularly in the run-up to Christmas.”

Other than cost increases, 42 per cent of chief financial officers said they had frozen recruitment, while 38 per cent said they had reduced job numbers in-store.

This was reflected in the official job figures, with almost 100,000 fewer retail jobs in the first quarter of 2025 compared to the previous year, the BRC said. More than a third of CFOs (38 per cent) said they had cut investment in local communities.

BRC chief executive Helen Dickinson said: “Retail was squarely in the firing line of the last budget, with the industry hit by £7 billion in new costs and taxes.

“Retailers have done everything they can to shield their customers from higher costs, but given their slim margins and the rising cost of employing staff, price rises were inevitable.”

Mr Lonsdale said: “The UK government entered office a year ago with an intention to revive high streets. So far they’ve talked a good game, but done little to justify it … this ratcheting up of statutory costs has tightened the fiscal screws on retailers and cannot simply be absorbed.”

Luke McGarty, head of policy and public affairs at the Scottish Grocers’ Federation, said: “We understand that the economy is facing global headwinds across a range of issues, but actions by our governments in Edinburgh and Westminster haven’t eased the problem.

“The cost of employing staff has skyrocketed with increases to employers’ National Insurance and wage rates. Meanwhile Scottish ministers have failed to pass on the business rates reliefs for retail available elsewhere in the UK.”

The Scottish Government was contacted for comment.