Shop price inflation climbed to its highest level in more than two years in August, as retailers began passing higher energy, input and commodity costs on to consumers.

Prices in UK shops rose by 1.5 per cent in the year to August, up sharply from 0.9 per cent in July, according to the latest BRC-NIQ Shop Price Monitor. That is the highest rate for more than two years, although it remains below the headline rate of consumer price inflation. The pace of increase has picked up markedly since shop price inflation slowed to 1.1 per cent in February, when retailers were still cutting prices to tempt cautious shoppers.

Helen Dickinson, chief executive of the British Retail Consortium, said: “The impact of higher energy, input and commodity costs is beginning to filter through into prices, particularly for ambient foods which are typically imported and processed. In non-food, electrical prices rose amid the ongoing AI boom, which is forcing up the price of memory chips and storage.”

The rise was particularly pronounced in non-food goods such as clothing and electrical items, where inflation accelerated to 0.9 per cent year on year in August, from 0.2 per cent in July. Food inflation also increased, rising to 2.8 per cent from 2.2 per cent.

Within food, there was a clear divergence between fresh and ambient products. Fresh food inflation eased slightly to 3 per cent in August, from 3.1 per cent in July, while inflation on ambient goods, the packaged and long-life products that fill the middle of the store, more than doubled to 2.5 per cent from 1.1 per cent. Chocolate, sweets, fizzy drinks and coffee recorded the steepest rises.

Mike Watkins, head of retailer and business insight at NIQ, said the acceleration in food and non-food inflation was not unexpected as some summer promotions came to an end. He added: “Retailers continue to keep prices low, helping consumers manage rising household costs such as energy and fuel. However, pressures are continuing to build across supply chains, and we can expect price competition to intensify as we move into the autumn months.”

The figures land against a backdrop of rising inflation across the wider economy. The Office for National Statistics reported that consumer price inflation rose to 2.9 per cent in July, up from 2.6 per cent in June, while the CPIH measure, which includes owner occupiers’ housing costs, increased to 3.1 per cent.

Energy is emerging as a particular source of renewed pressure. ONS figures showed inflation in housing and household services jumping to 4.1 per cent in July, from 2.7 per cent the previous month, driven largely by higher gas prices. Gas prices were 14.7 per cent higher than a year earlier, while electricity prices rose 3.6 per cent.

The squeeze is expected to intensify if energy costs stay elevated. The Centre for Economics and Business Research warned this week that the Middle East conflict was likely to strip £70.4 billion from UK households’ real spending power over the next two years, as higher energy prices fuel inflation and weaken wage growth. The consultancy estimated the war in Iran would leave household spending power £1,100 lower than previously expected in 2026 and £1,300 lower in 2027. Economists have separately warned that the conflict could knock £35 billion off UK output and push inflation back above 4 per cent.

For retailers, many of them small and mid-sized businesses already contending with higher wage bills and taxes, the combination of rising supply chain costs and renewed energy pressures threatens to make the autumn a difficult trading period. Dickinson warned that rising operating costs were limiting the industry’s ability to absorb further increases, echoing earlier warnings from retailers that tax rises in the autumn budget would push shop prices higher still.

“The months ahead look challenging for households, with rising bills putting further pressure on budgets,” she said. “Retailers are facing persistently high operating costs, limiting their ability to absorb further increases without impacting investment, jobs and prices. If the government is serious about supporting growth while keeping the cost of living in check, it must address the cost of doing business, including by tackling the growing burden of business rates, packaging and employment taxes.”

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