UK consumers and businesses are being warned that higher prices could persist through the summer despite any progress in ceasefire talks between the United States and Iran, as disruption in global shipping and surging energy and raw material costs continue to feed inflation. New figures from the British Retail Consortium show shop price inflation rising to 1.2% year on year in May, slightly above the three-month average of 1.1%, with furniture and health and beauty products among the categories seeing the sharpest increases. Retailers have tried to cushion shoppers with promotions, but trade leaders say cost pressures are becoming harder to absorb.
The BRC said high oil prices and the prolonged disruption to the Strait of Hormuz shipping route have added to the strain on supply chains and business costs. It also noted that while bargains remain available in some sectors, including TV and audiovisual equipment, retailers are pushing deals as households prepare for the upcoming football World Cup in the United States. Food inflation has eased in a relative bright spot, falling to 2.7% in May, below the longer-term average of 3.1%, helped by intense competition among supermarkets. Even so, the wider outlook remains uncertain as businesses face elevated operating costs and weaker consumer spending power.
Helen Dickinson, chief executive of the BRC, said retailers are working hard to hold prices down but are being squeezed by higher energy bills and disruption linked to the conflict in Iran. She warned that companies cannot keep absorbing these costs indefinitely and said this risks pushing prices higher in the months ahead. Dickinson urged the government to cut the taxes and levies that make up most of firms’ energy bills and to reduce regulatory burden.
A separate report from the British Chambers of Commerce found that only 16% of businesses say they have not been affected by turmoil in the Middle East following US and Israeli attacks on Iran. The BCC said 80% of firms expect either current or future consequences from the conflict, with higher energy prices, shipping delays and rising raw material costs the biggest concerns. Manufacturing has been hit hardest, with 68% of firms already affected and another 23% expecting future disruption.
The BCC warned the economic impact could last for months even if a ceasefire holds. William Bain, head of trade policy at the BCC, said uncertainty over the Strait of Hormuz is especially worrying for UK businesses that rely on the passageway. The research found three-quarters of companies expect energy bills to rise over the next year, while just over a third fear they may not be able to pay.
Business groups are calling for more government support, including help with energy costs, advice on reducing bills, and stronger protections against unfair pricing. They also want faster progress on renewable energy, grid reform and storage capacity. The government said it understands the pressure firms are under and pointed to schemes designed to cut electricity bills for manufacturers and energy-intensive industries.
