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UK food inflation remained steady at 2% in December although business groups continue to warn of higher prices later in the year.
Prices were up 0.5% compared to November, the same monthly rise that occurred one year ago, according to the Office for National Statistics (ONS).
The overall inflation rate (CPI) rose by 2.5% in the 12 months to December, down from 2.6% in November.
The drop should ease some pressure on the chancellor Rachel Reeves, especially if it leads the Bank of England to cut interest rates next month.
However, business groups are warning of higher food inflation later in the year due to government policies such as higher employer national insurance, a rise in the minimum wage, and new packaging levies.
The British Retail Consortium (BRC) claimed this morning that inflation could rise to 4.2% this year unless the government took step to mitigate the price pressures.
The BRC surveyed 52 chief financial officers at leading retailers, finding the biggest concerns were falling demand for goods and services, inflation for goods and services, and the increasing tax and regulatory burden.
When asked how they would be responding to the increase in national insurance, two-thirds said they would raise prices while around half said they would cut staff.
Last month, The Institute of Grocery Distribution (IGD) forecast food inflation could go up to 4.9% due to measures in the government’s budget.
The ONS figures showed fruit and sugar, jam, honey, syrups, chocolate, and confectionery were the two categories where prices rose most. Bread, cereals, and soft drink saw prices either unchanged or rise at a lower rate compared to last year.
Alcohol and tobacco inflation fell to 5.3% in December, down from 6.8% a month earlier.
Morning update
Soft drinks group Nichols grew revenue by 0.8% to £172.1m last year and expects its full year results to be in line with market expectations.
The Vimto owner said growth was especially strong in the UK where sales rose by 5.4% largely driven by innovation and distribution gains.
“Our strategy will drive a high-margin, highly cash-generative, diversified business, built on the unique strength of the Vimto brand,” said CEO Andrew Milne.
Pub chain Fuller, Smith & Turner scored an “excellent” Christmas with like-for-like sales up 10.2% over the five-week Christmas and New Year period.
This helped bring its like-for-like sales up 5.9% for the 41 weeks to 11 January 2025.
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