Shoppers have been warned inflation has not peaked yet, as retail price rises reached the highest level since early 2024, due to the impact of higher business costs.

The British Retail Consortium (BRC) said shop prices increased 1.5 per cent in January, up from 0.7 per cent in December and the highest level since February 2024, when it reached 2.5 per cent.

Helen Dickinson, chief executive at BRC said: ‘Any suggestion that inflation has peaked is simply not borne out by these figures.

‘Shop price inflation jumped this month due to high business energy costs and the hike to National Insurance continuing to feed through to prices.’

Meat, fish and fruit saw strong rises, reflecting weak supply and stronger demand, while furniture, flooring, and health and beauty also saw prices rise.

Last week’s official figures showed inflation unexpectedly jumped to 3.4 per cent in December, up from 3.2 per cent in the previous month.

The BRC’s figures show food price inflation rose to 3.9 per cent in January, up from 3.3 per cent in the previous month. 

Meanwhile, the price of fresh food increased to 4.4 per cent in January, with a three-month average inflation rate of 3.9 per cent.

Food price inflation has often outpaced the overall CPI rate, because retailers are worst affected by sharp rises in energy and labour costs. Meanwhile, farmers are also suffering higher costs and other elements of food production are adding to the pressure.

In a document published after the Budget, the Treasury acknowledged that food prices are ‘still too high’. However, critics say that measures taken by the Chancellor will fuel inflation, namely an above-inflation increase in the living wage across all age groups.

This is in addition to the changes introduced in the 2024 Budget, including an increase in employer National Insurance contributions.

The BRC said non-food inflation also increased to 0.3 per cent in January, against a decline of 0.6 per cent.

‘It is a challenging time for households,’ said Dickison. ‘Retailers do what they can to keep prices down in a competitive market, but thin margins and rising costs of Government policy make it harder.

‘Government must double down on costs in order to support households. A good place to look is the spiralling energy charges… which are raising operating costs, squeezing margins and flowing through into retail prices.’

Retailers have warned that groceries will become even more expensive in the coming months. 

Shop prices would be even more expensive but for competition from discounters. As this grows, retailers are likely to step up discounts and price matching, says NIQ’s Mike Watkins.

He said: ‘There are still savings to be made at the checkout as some non-food retailers are still on promotion and many food retailers continue to reduce prices on everyday items as a way to drive footfall.’