Shop prices fall further in August but Brexit pressure looms

Shoppers saw prices fall further in August but could see recent deflation come under pressure as Brexit looms, according to new figures.

Prices at retailers fell by 1.6 per cent this month, after a 1.3 per cent decline in July as coronavirus continued to affect industry.

It said this was particularly driven by non-food stores which continued to cut prices in order to drive people into stores amid low footfall.

Non-food prices slid by 3.4 per cent in August, as deflation accelerated from 2.9 per cent in July.

The BRC-Nielsen shop price index revealed also revealed that fresh food inflation slowed down significantly in August, dropping to 0.2 per cent growth from 0.9 per cent in July.

This inflation eased as the availability of fresh, seasonable produce improved throughout the month, it said.

Meanwhile, the price of ambient food, such as store-cupboard items, increased by 2.8 per cent in August, accelerating from 2.3 per cent growth in July.

Helen Dickinson, chief executive of the British Retail Consortium (BRC), said: "Consumers will welcome another month of falling prices in shops.

"However, these lower prices are already under threat from increased costs associated with implementing coronavirus safety measures and are certain to rise if the UK ends the transition period without a trade deal with the EU.

"The absence of a tariff-free deal will lead to higher prices for consumers as thin retail margins force retailers to raise prices in response to higher import costs."