UK supply chain cost pressures spill over to prices

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Empty shelves in a Sainsbury’s store in Blackheath in the West Midlands. Supermarkets urged customers not to panic to buy in response to reports of empty shelves, saying they continue to receive regular deliveries. The UK’s largest supermarkets described any shortages as “patchy” across stores, but said there was no need for customers to change their shopping habits. Photo: PA

Transport costs, labor shortages, raw material costs and Brexit red tape are responsible for rising costs for consumers, as inflation spills over into store prices .

According to the British Retail Consortium (BRC) Monthly Monitor, annual in-store price deflation fell to 0.5% in September from the 0.8% decline in August.

This is a slower rate of decline than the 12- and 6-month average price drops of 1.4% and 0.8%, respectively, and the slowest rate of decline since January 2020.

At the same time, non-food deflation slowed to 1.0% in September, from a drop of 1.2% in August. This is a slower rate of decline than the 12 and 6 month average price drops of 2.4% and 1.2%, respectively.

After five months of deflation, food prices rose 0.1% in September, compared to -0.2% in August. This rate is lower than the 12-month average price growth rate of 0.2% and higher than the 6-month average price growth rate of -0.3%.

Food prices have increased year-over-year for the first time in six months, and some non-food items, such as DIY and gardening, are experiencing the highest rate of inflation since the summer of 2018.

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Other product lines, such as furniture and electrical appliances, have also seen their prices rise for consecutive months, indicating unresolved shipping issues associated with high demand.

“It is inevitable that prices will continue to rise, but government intervention would minimize the impact on consumers,” said Helen Dickinson OBE, CEO of the British Retail Consortium.

“The government must find a long-term solution to the shortage of heavy truck drivers by expanding the size and scope of the new visa regime for foreign drivers so they can fill in the gaps while new UK drivers are trained “said Dickinson.

“Without it, these additional burdens on what is already a precarious business environment will affect the UK consumer and the prices they pay for the goods they want and need.”

The news comes amid a looming cost-of-living crisis in the UK and inflationary pressures across many sectors, as gas and electricity prices are set to soar.

Benchmark natural gas prices in the UK and Europe have tripled this year, and higher prices will lead to higher energy costs for businesses and higher bills for consumers.

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This surge is expected to eat into the profits of several energy companies in the coming months and put pressure on net profit margins which are already at their highest since 2008.

The Bank of England also warned last week that consumer price index (CPI) inflation is expected to rise temporarily in the near term, to reach 4% in the fourth quarter of 2021, largely due to the evolution of energy and goods prices. He said CPI inflation is expected to fall back to near the 2% target in the medium term.

He warned that since the August MPC meeting, the pace of recovery in global activity has shown signs of slowing down.

Watch: What is inflation and why is it important?


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