The retail sector is encountering a new financial challenge as inflation rates shift, affecting their business operations.
- Latest data reveals that inflation fell to 1.7%, dropping below the Bank of England’s target for the first time in over three years.
- Despite the overall decline, food inflation has risen to 1.9%, impacting consumer prices.
- This change in inflation rates could lead to a £140 million increase in business rates for retailers starting next April.
- The British Retail Consortium warns that higher business rates could hinder new investments and job creation.
According to recent statistics, inflation has decreased to 1.7% last month, marking the first instance in over three years where it has fallen below the Bank of England’s 2% target. However, food inflation did not follow this trend and instead increased by 0.6 percentage points to 1.9%, affecting consumer spending power.
The latest Consumer Price Index (CPI) data is crucial as it will determine the business rates set for the following April. The retail industry is projected to face an additional £140 million in business rates due to this latest CPI figure.
Industry experts caution that the increase in business rates continues to pose significant challenges for retailers. Kris Hamer, director of insight at the British Retail Consortium (BRC), stated that the ongoing hikes in business rates are ‘damaging investment and preventing the creation of new shops and jobs.’ The situation could worsen if the upcoming Budget includes higher business taxes.
Transport costs, which were lower, helped offset some of the inflations’ upward pressure last month. Despite a rise in food prices, which saw a month-to-month increase of 1.7% (down from 2.2% the previous month), clothing and footwear inflation rates slowed from 1.6% to 0.8%. Meanwhile, the alcohol and tobacco sectors experienced a surge in inflation at 4.9%.
The British Retail Consortium has called upon the Chancellor to consider a 20% reduction in business rates for retail premises, termed the ‘Retail Rates Corrector.’ Kris Hamer believes this adjustment is necessary to ‘redress the imbalance that sees retailers paying a higher proportion of their profits in taxes of almost any industry.’
The shifts in inflation rates pose both challenges and opportunities for the retail sector, necessitating strategic adjustments.
