Lowest shop price inflation since December 2021 as some prices actually fall – BRC says
Items bought in shops are becoming more expensive at the slowest pace in more than two years, according to latest industry figures which show that some prices are actually falling.
It means that goods, such as clothes and food, are becoming more costly but far less than before, according to the shop price index from the trade organisation for UK retailers, the British Retail Consortium (BRC), and retail behaviour researchers NielsenIQ.
Why have some prices fallen?
The shop price index for April said products other than food fell 0.6% in price compared to a year earlier, as clothes and shoe price tags fell due to ramped-up promotions. A month earlier, in March, prices had risen 0.2% since February.
Food inflation slowed to 3.4%, the 12th drop in a row and the lowest level since March 2022. It had been as high as 15.7% in April 2023.
Falls in fresh food inflation – such as butter, fish and fruit – were also due to competition among grocers for shoppers, as well as easing input costs like cheaper energy bills, the BRC said.
Overall shop price annual inflation eased to 0.8%, down from 1.3% in March, the lowest since December 2021.
The data doesn’t capture inflation in the services or manufacturing industries that consumers pay for.
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BRC chief executive Helen Dickinson said: “While consumers will welcome the lower shop price inflation, geopolitical tensions and the knock-on impact on commodity prices, like oil, pose a threat to future price stability.”
“Retailers will continue to do all they can to keep prices down, but government has a role to play with pro-growth policies that allow businesses to invest in the customer offer.”
Where is overall inflation now?
The official measure of inflation, recorded by the Office for National Statistics (ONS), stood at 3.2% in March, the weakest level for two-and-a-half years as food prices fell but energy prices remained high amid tension in the Middle East and Ukrainian attacks on a Russian oil refinery.
Prices began to rise in 20201 after COVID-19 lockdowns halted supply chains which led to shortages of some goods.
This was compounded following Russia’s invasion of Ukraine. In response, western countries rushed to wean themselves off Russian gas imports, which caused a rise in energy costs.
Mike Watkins, head of retailer and business insight at NielsenIQ, said: “it is good news for shoppers that the cost of their grocery shop is starting to stabilise and that the prices of many non-food goods are now cheaper than a year ago.”
Business
Vivergo: How US-UK trade deal could bring about collapse of huge renewable energy plant in Hull
The smell of yeast still hangs in the air at the Vivergo plant in Hull but the machines have fallen quiet.
More than 100 lorries usually pass through here each day, carrying 3,000 tonnes of wheat. It is milled, fermented and distilled. The final product is bioethanol, a renewable fuel that is then blended into E10 petrol.
This is a vast operation. It took several years to build, with considerable investment, but it is on the verge of closing down. Management and staff are holding out for a last-minute reprieve from the government but time is running out.
It’s been a turbulent journey. The plant was already being annihilated by US rivals, losing about £3m a month. Vivergo and Ensus, based in Teesside, blamed regulations that enable US companies to earn double subsidies.
They were pushing for regulatory change but then a killer blow: The US-UK trade deal, which allows 1.4 billion litres of American ethanol into the UK tariff-free (down from 19%).
“We’ve effectively given the whole of the UK market to the US producers,” said Ben Hackett, managing director at Vivergo.
“If we were to have the same support that the US industry has, if we could use genetically modified crops, we wouldn’t need that tariff. We would be able to compete. If we had the same energy costs. We wouldn’t need those tariffs.”
The government has the weekend to come up with a plan that could keep the business running. If it fails, Vivergo will begin issuing redundancy notices to its 160 staff.
Ben Hackett
It’s a devastating prospect for workers, many of them live in Hull and are nervous about alternative opportunities in the area.
Mike Walsh, a logistics manager who has been working at the plant for 14 years, said: “It’s not a great place to be at the moment. It’s a very well paid, very high-skilled role and they’ve (Vivergo) given everybody an opportunity in an area that doesn’t pay that well…. The jobs market isn’t as good as what people would like. So it does impact the local economy.”
He called on the government to “help us, save us, give this industry a future”.
His colleague Claire Wood, lead productions engineer, said: “I moved here after a career in oil and gas for 10 years, partly because I want to be part of the transition to renewable fuels. I can see so much potential here and it’s absolutely devastating to know that this place might be closed very, very shortly and that all that potential just goes away.”
Thousands more could be affected. Haulage companies may have to lay off truck drivers and farmers could also suffer a blow.
Vivergo makes bioethanol using wheat. That wheat is bought from farms from Yorkshire and Lincolnshire.
Claire Wood
The National Farmers Union has sounded the alarm, saying: “Biofuels are extremely important for the crops sector, and their domestic demand of up to two million tonnes can be very important to balance supply and demand and to produce up to one million tonnes of animal feed as a by-product.”
Another bioproduct is carbon dioxide. The gas can be captured and used to put the fizz in drinks or injected into packaging to preserve food.
If Vivergo and Ensus were to go, Britain would lose as much as 80% of its output of carbon dioxide. Supplies are already tight across Europe, meaning this decision could compound shortages across a range of sectors, from meat-packing to healthcare.
The industry is calling on the government to help. Vivergo says it needs temporary financial support but that the government must create a regulatory and commercial environment in which it can thrive.
It says rules that award double subsidies to companies that use waste product in their bioethanol must be changed. At present, these rules are being used by US companies that make ethanol from Uldr – a by-product of processing corn. They argue this is not a genuine waste product.
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Another option is to grow the market. Industry leaders are calling on ministers to increase the mandated renewable fuel content in petrol from 10% to 15% and for an expansion into aviation fuels. That would allow British companies to carve out a space.
The government has been locked in talks with the company since June.
It said: “We will continue to take proactive steps to address the long-standing challenges it faces and remain committed to a way forward that protects supply chains, jobs and livelihoods.”
However, the time for talking is almost over.
Mr Hackett said he had no idea how the government would respond but he was firm with his stance, saying: “In times of global uncertainty, losing that energy certainty and supply from the UK is a problem.
“I think what they’re missing out on is the future growth agenda. We’re the foundation on which the green industrial strategy can be built. We make bioethanol that today decarbonises transport. Tomorrow it will decarbonise marine. It will decarbonise aviation.”
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