Inflation in the UK has fallen - yet food prices have not

Inflation in the UK has fallen to 10.1%, according to figures released by the Office for National Statistics (ONS). For the third time in three months. Despite inflation values being in double digits for 5 months, January saw a 0.4% decline from December 2022, when inflation was 10.5%. The rise in passenger transport fuels and gastronomy contributed most to this downward movement. However, many businesses are not yet in a position to cut prices to cope with the loss of profit.

The easing of pressure, however, came for the Bank of England. Last month it raised interest rates for the tenth time in the last year. The Bank is expecting inflation to fall quickly during 2023 as wholesale energy prices have fallen a lot. Additionally, the price of imported goods is expected to come down as well. Given that people have less money to spend, it's expected that there will be less demand for goods and services. Bank of England is expecting inflation to fall to around 4% by the end of this year.

Even though petrol prices continue to fall, retailers are concerned that food prices have not yet peaked despite the fall in inflation. Last December, food and non-alcoholic beverage prices hit record highs, with inflation climbing to 16,8% and reaching a 45-year maximum. As inflation is still high despite the cuts, citizens will still have to wait to feel the lift of pressure.

Benoit Soucaret, Chief Experience Officer at Merkle UK, a data-driven customer experience management company, is convinced that if retailers cannot give lower prices across the board, the solution could be to provide customers with alternatives such as discounts and loyalty programmes.

Statistics show that up to 69% of shoppers are influenced by a loyalty program when making a purchase and 58% of shoppers shop at stores where they are part of a loyalty program at least once a month.

Benoit Soucaret believes that transparency is the key as customers are now more selective with their purchases. "It is no longer about what they want, it's about what they need. Everything else becomes secondary. Retailers need to be honest with their customers about price rises and offer alternatives such as discounts and useful loyalty programmes," said the Chief Experience Officer at Merkle UK.

United Kingdom inflation eased to 10.1% in January 2023. And although it will take a long time for the pressure on the UK households to ease, the Bank of England expects it to continue to fall towards its fattened 2% target.