Shop prices in the United Kingdom rose at their fastest pace in more than two years in August, adding to the mounting cost-of-living pressures on households. According to data from the British Retail Consortium (BRC), retail prices increased by 1.5% year-on-year, up from 0.9% in July. This marks the highest level of shop price inflation since February 2024.

The increase was driven by rising costs in both food and non-food categories. Food inflation climbed from 2.2% in July to 2.8% in August, while prices for non-food items such as electronics and clothing rose to 0.9%, up from 0.2% the previous month. Within the food sector, ambient or shelf-stable products—including tinned goods and breakfast cereals—experienced a particularly sharp rise, with prices increasing by 2.5%, more than doubling from 1.1% in July. Fresh food inflation remained high at around 3%, though it showed a slight easing from 3.1% the month before.

Industry experts and retail leaders attributed much of the inflationary pressure to elevated energy costs, supply chain challenges, and increases in wages and business taxes. Helen Dickinson, chief executive of the BRC, highlighted that the impact of higher energy prices and commodity costs is beginning to filter through into retail prices, especially for processed and imported foods. She also pointed to continued rises in operating expenses for retailers—such as employer National Insurance contributions, the rising minimum wage, and business rates reform—which constrain businesses’ ability to absorb costs without passing them to consumers.

The ongoing conflict in the Middle East, particularly involving Iran, has contributed to the rise in oil and gas prices by restricting supplies through key shipping routes. This has led to increased household energy bills, with the energy regulator, Ofgem, announcing a 4% rise in the energy price cap from October, reaching the highest level in three years, and forecasts suggest another 9% increase scheduled for January. These factors are expected to further strain household budgets in the coming months.

In addition to food and energy costs, inflation in the technology sector has been influenced by the surge in demand for memory chips and storage driven by the rapid expansion of artificial intelligence (AI) industries. This has contributed to higher prices for electronic goods, including laptops and other devices.

Market analysts expect that the end of summer promotional discounts has also played a role in the acceleration of retail price inflation. While retailers continue to try to limit price increases to support consumers dealing with rising household costs, pressures across supply chains remain substantial. Some experts anticipate that price competition may intensify in the autumn months as businesses adjust to continued cost challenges.

The broader inflation environment remains elevated, with the UK’s consumer price index (CPI) showing a rise to 2.9% in July from 2.6% in June. Additional measures, including the CPIH which accounts for owner-occupiers’ housing costs, reported inflation reaching 3.1%. The combination of these trends has raised concerns among economists and policymakers about the potential impact on consumer spending and economic growth in the near term.

In response, industry leaders have called on the government to address business costs, including reviewing the burden of business rates, packaging charges, and employment taxes, to help support economic growth while managing inflationary pressures. Meanwhile, households face a challenging outlook as energy and commodity price increases continue to feed through to retail prices.