Food prices are expected to rise in the latter half of 2025 due to changes announced in the Budget, according to the British Retail Consortium (BRC), which said there was “little hope” of prices going anywhere but up. The costs of higher wages and National Insurance tax changes which take effect in April will be passed on to consumers, said the lobby group. It forecast that food price inflation would rise from 1.8% last month to 4.2% in the second half of the year, and that prices of vegetable oil, orange juice, butter, and coffee would continue to increase, while overall shop prices, which have been falling, were expected to start rising again.
The National Living Wage for over 21s will increase from £11.44 to £12.21 an hour from April, and employers’ National Insurance contributions will rise from 13.8% to 15%, Chancellor Rachel Reeves confirmed in October. Retailers hit back, warning in November that higher wages and taxes would make job cuts unavoidable and lead to price rises and shop closures. This led to BRC’s warning this week.
BRC’s modelling, combined with predictions from 52 chief financial officers, indicated that higher food price inflation in the latter half of the year was likely. “As retailers battle the £7bn of increased costs in 2025 from the Budget, including higher employer National Insurance, National Living Wage, and new packaging levies, there is little hope of prices going anywhere but up,” said CEO Helen Dickinson.
As for the current situation, in December, food price inflation was running at 1.8%, the lowest rate since November 2021, according to the BRC. However, the pace of price rises for fresh food such as fruit and vegetables went up 1.2%, while inflation for store cupboard goods stood at 2.8%. Retailers have been warning of price rises due to the Budget measures.
The BRC uses a different basket of goods than official figures from the Office for National Statistics to measure inflation, though the figures are broadly similar. Prices went down overall in shops before Christmas, but this was due to non-food goods deflation, according to BRC. This week, Next said it would increase prices on some clothing from April to offset “a unusually high” £73m increase in staff wages and taxes. Next said it expected prices to increase by 1% over a year, below the current rate of inflation
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