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Rising bills and wages dent hopes for inflation falls in 2024

Rising bills and wages dent hopes for inflation falls in 2024
John Fitzsimons
Written By:
John Fitzsimons

The prospects for further falls in inflation next year are being undermined by rising business bills, including the increase to the National Living Wage.

That’s according to the British Retail Consortium (BRC), which warned that the progress made on bringing inflation under greater control this year could be entirely wiped out.

Helen Dickinson, chief executive of the BRC, argued that retailers were committed to delivering “an affordable Christmas” for their customers, but said that they face “new headwinds” in the year ahead, from increases in business rates bills to the “hidden costs of complying with new regulations”.

She added: “Combining these with the biggest rise to the National Living Wage on record will likely stall or even reverse progress made thus far on bringing down inflation, particularly in food.”

The warning comes after the BRC published its latest shop price index, which found that overall inflation had dropped to 4.3% in November from 5.2% in October, the lowest level seen since June 2022.

Notably, food price inflation had dropped from 8.8% to 7.8%, itself the lowest figure since July 2022.

Dickinson noted that retailers were “competing fiercely” ahead of the festive period, and this was driving down prices. 

Mike Watkins, head of retailer and business insight at NielsenIQ ‒ which helps compile the index ‒ noted that with the recent slowdown in consumer spending, many non-food retailers will have been reliant on Black Friday to kick start sales.

He continued: “Across all retail, this year shoppers will be making savings on everyday essentials to help pay for their family Christmas.”

A ‘disappointing festive period

The BRC study comes after separate figures from the Confederation of British Industry (CBI) this week, which found that retail sales volumes dropped year-on-year in November. That’s the seventh straight month in which sales have dropped, while retailers expect sales to decline still further in December.

Martin Sartorius, principal economist at the CBI, noted that retail sales had “languished in negative territory” for a lot of 2023, due to how household finances are strained currently. 

He added: “Retailers had hoped the Chancellor’s Autumn Statement would offer a reprieve from next year’s hike in business rates. While prioritising relief for SMEs and key sectors is understandable, many retailers are being left to contend with another increase in costs at a time when they are least able to afford them.”