UK shop prices continue to fall but cost pressures mount

Food prices in Britain continued to rise in April while overall shop prices fell at the slowest pace in three-and-a-half years, a fresh survey has suggested.

A report from the British Retail Consortium (BRC) showed that food prices increased 0.9% from a year earlier following a 1% increase in March.

Overall shop prices were down 0.5% in April following a 0.8% decline in March, the slowest rate of fall in the index since November 2013.

Shop prices have now fallen for four consecutive years, with the BRC saying that competition among retailers was keeping prices depressed.

However, it warned that rising inflationary pressures faced by retailers as a result of the weaker pound would be gradually passed on to shoppers over the coming months.

"Prices are undoubtedly on an upward trajectory, which we expect to gradually play out over the course of the year," BRC chief executive Helen Dickinson said.

"With the squeeze on household incomes tightening, the retail industry expects plans from the next government that put consumers first in the Brexit negotiations, ensuring that ordinary shoppers are protected from the cost of unwanted new tariffs."

Fresh food prices rose 1% year-on-year in April following a 0.9% increase in March. Non-food prices declined 1.4%.

Mike Watkins, head of retailer and business insight at Nielsen, said: "Shoppers are seeing inflation in travel, fuel and when spending away from home, so retailers are cautious about passing on cost price increases.

"So there continues to be deflation in shop prices albeit we are already seeing inflation in food."

The UK's official inflation rate stood at 2.3% in March – above the Bank of England's 2% target.

Food prices increased 1.2% on an annual basis during the month, the biggest rise recorded in three years.

The headline inflation rate is expected to climb further in the coming months as the weaker pound pushes up import prices.