BRC chief Helen Dickinson has warned the government risks “losing the battle against inflation” after August’s rate of food price increases outstripped average wage growth.
Food inflation hit 5.1% in August, inching higher than the 4.7% increase in wage growth averaged over May-July, according to ONS figures, as food spend continued to eat deeper into family budgets.
The sustained hike in food prices – thanks to high wholesale and supply costs, higher labour and EPR costs – has been a major driver of inflation, which reached 3.8% overall in August.
The possibility that prices will rise faster than wages is at the forefront of consumers’ minds. According to BRC statistics, 57% of UK consumers said it was their top concern, higher than tax rises (49%) and rising unemployment (26%).
“The government risks losing the battle against inflation and working families are understandably worried,” Dickinson said.
She claimed that food inflation could remain above 5% well into 2026 if the government did not back down from further tax rises at the autumn budget. The BRC has previously slammed the Chancellor’s proposed business rates surtax, whereby the largest shops will be taxed more to fund business rate cuts for smaller stores.
Dickinson called the surtax “robbing Peter to pay Paul”.
“The biggest risk to food prices would be to include large shops – including supermarkets – in the new surtax on large properties,” she said.
“This would effectively be robbing Peter to pay Paul, increasing costs on these businesses even further and forcing them to raise the prices paid by customers.”
Retail sentiment ahead of the budget on 26 November need not all be a “drumbeat of doom”, however, according to Richard Chamberlain, RBC Capital Markets’ co-head of global consumer & retail research.
He explained that retail spend would likely prove “resilient” thanks to a year-on-year upward trend in household disposable income, as falling interest rates push consumers to spend, rather than save.
In September 2025, the Bank of England decided to maintain its interest rate at 4%, after cutting it from 4.25% in August, in fear that a further cut would spark more inflation. The rate had peaked at 5.25% from August 2023 to July 2024.
“Interest rate cuts typically take 9-12 months to feed through to retail sales,” Chamberlain said.
Having climbed consistently post-pandemic, savings rates have now fallen for the first time since Q1 2022, dropping from 12% of income at the end of 2024 to 10.9% in Q1 2025.
Savings remain at a relatively high level compared with post-financial crash norms, leading Chamberlain to expect a “gradual fall” in savings “as lower interest rates create less of an incentive to save” – and thus leave consumers with more money to spend.
“Overall, we expect consumers to be price sensitive, and to continue to shop heavily around events and when they have a reason to shop.”
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