the Business Forum and
the Economic Partnership
in Brighton & Hove
Homepage    BCRP Intranet    Funding    Events    Knowledgebase    Links    About us     Contact us
Key projects
Crime
reduction
 


Inward
investment
information
 


Licensee
Forum
 

Workforce development 

Transport
 

Business &
climate
change

Property &
Development sites

Business
Improvement
Districts

Housing
 

Strategy
 

Consultation opportunities
 

Brighton & Hove Business Forum
8-11 Pavilion Buildings, Brighton, BN1 1EE
Tel: 01273 735442
Email: info@brighton
business.co.uk

© Brighton & Hove
Business Forum

News - 6 February 2010

Retailers hold prices in check

Discounts, promotions and swallowing of the VAT increase are just some of the tactics retailers are using to stay in business. The overall effect is holding back inflationary growth.

Stephen Robertson, British Retail Consortium Director General, said, “January’s VAT increase was lost among a huge number of discounts and promotions. We would have expected non-food inflation to be higher because of the VAT rate reversal, but many shops held off passing the extra costs onto their customers.

"Fierce competition, in the face of weakening consumer demand and uncertainty about the recovery, is keeping shop prices down. “Food inflation slowed for the first time since August 2009. It's now only a third of last year’s high. This has largely been driven by a slowdown in fresh food inflation, particularly for meat and milk. But the cost of commodities, such as sugar and coca, has significantly increased in the past year which will put upward pressure on food inflation if it continues."

Mike Watkins, Senior Manager, Retailer Services, Nielsen comments, “With weaker shopper demand after Christmas and many retailers holding back or absorbing the VAT increase, it is no surprise that the shop price inflation is broadly unchanged this month. Many seasonal lines have also come off promotion and this will have impacted some food prices but food retailers are having to work hard to encourage shoppers to spend and there is a continuation of high levels of in-store promotions in January.“

The BRC-Nielsen Shop Price Index reported annual inflation of 2.3% in January, up from 2.2% in December. The marginal increase in overall shop price inflation was driven by the non-food category which reported its highest annual inflation rate since the series began in December 2006, but this is much lower than the Consumer Price Index (CPI). Many retailers held off passing the VAT increase on to consumers in the hope of stimulating demand. As a result, inflation has not risen as fast as we had anticipated. The large number of discounts and promotions meant that the increase in VAT on 1st January was lost among deeper discounts.

Many consumers used VAT returning to 17.5% as an opportunity to bring purchases forward, which helped contribute to the best December retail sales growth reported since December 2005. We may see a further rise in inflation once the VAT reversal has been passed on fully.

Food inflation slowed for the first time since August 2009, driven by slowing fresh food inflation. However, upward pressure from commodity prices could be in the pipeline. The Thomson Reuters/Jefferies CRB Index, which tracks the movements of a basket of commodities, is currently 22% up on a year ago and has increased 10% in the last six months. If commodity prices continue to rise, retailers will face increasing pressure on their cost base in the medium term, which is likely to put pressure on consumer prices. In the short term, retailers are likely to absorb these costs as the outlook for consumer demand remains weak. The output Producer Price Index for food and beverages in December was unchanged from November’s annual inflation rate of 1.8%.

The effective exchange rate for sterling steadily rose during 2009, increasing 9%. However, most of the improvements were made in the first 6 months of 2009, when sterling appreciated 14%. The second half of the year proved more challenging as sterling fell nearly 4%, applying inflationary pressure on imported goods.

Retailers are operating in an increasingly difficult environment with many consumers expected to tighten their belts over the next quarter. The household saving ratio increased sharply during 2009 with the latest figures increasing to 8.6% from 7.6% the previous quarter, the highest since 1998. Consumer confidence remained weak as the uncertainty surrounding the speed of the economic recovery remains uncertain. News that the economy only grew by 0.1% in Q4 of 2009 was clearly below expectations and is likely to dampen consumer confidence further. All these factors will put downward pressure on inflation.

 


Read related items on:
Retail, pubs, clubs and restaurants
Recession
British Retail Consortium
Nielsen
Robertson, Stephen


Browse our business Knowledgebase or search by keyword


Headlines

16 May 2018
Can you help us help rough sleepers? Search for a venue to provide shelter
15 May 2018
New Research Reveals Cost of Opening A Business in Brighton: £6,000 11 May 2018
Tech firm SaleCycle to open new office in Brighton, creating 30+ new jobs 4 May 2018
Get involved - National Numeracy Day This 16 May 1 May 2018
BUSINESS IMPROVEMENT DISTRICT INDUSTRY CELEBRATES 300 BIDS 1 May 2018
Barclays' High Growth & Entrepreneurs Awards 2018 launch to celebrate start-up leaders in the UK 30 April 2018
Barclays launches major drive to help SMEs tackle Cymbercrime 24 April 2018
An evening with Chris Fox, Lib Dem Peer 24 April 2018
"A triumph of innovation" 13 April 2018
Brighton city Centre Vacancy Rates continue to buck national trend 12 April 2018
The Ivy in the Lanes Set to open 2 May 2018 11 April 2018
Free Dr Bike Service Returns 20 March 2018
Brighton named most entrepreneurial city AND second best for student happiness according to Fresh Student Living 19 March 2018
A Meeting with Chris Fox, Lib Dem Peer - Why Business Matters 14 March 2018
Better Business for All Event with BEIS 7 March 2018
Brighton celebrates women in tech as Spring Forward festival returns for a fourth year 6 March 2018
Six months of success for BTN BikeShare 2 March 2018
Sustainability in Action masterclasses for Sussex businesses 2 March 2018
Doing Business in China comes to Brighton 1 March 2018
Brighton & Hove Chamber of Commerce presents: Protecting your brand- a guide for fast growth businesses 1 March 2018
Long haul passengers boost local economy and jobs, according to new Gatwick report on the 'Visitor Economy' 28 February 2018
Save time reporting crime 27 February 2018
Warren Morgan Resigns from Brighton & Hove City Council 23 February 2018
Brighton Technology Company, Paxton Ranks in Sunday Times 100 Best Companies to Work For 23 February 2018
Greater Brighton's Commercial Property Database 22 February 2018
SE-ASSIST - Launch of Loan Capital in Greater Brighton 19 February 2018
House Price update Q4 2017 19 February 2018
What would you do in a crisis? 19 February 2018
The investment journey for high growth entrepreneurs 9 February 2018
Make Change Count 2018 - helping rough sleepers in Brighton & Hove 8 February 2018
Brighton Technology Company Paxton Announces Recipients of New Scholarship Programmein Association with the University of Brighton 8 February 2018
Cyber London Accelerator Invites Summer 2018 Entries 8 February 2018
Innovate UK Launches Strand 2 Emerging and Enabling Technologies Sector Competition 8 February 2018
Success In Sussex As Food And Drink Heroes Crowned Winners 8 February 2018
UK Games Fund - Fourth Round Open to Applications 8 February 2018
Innovate UK & Prince's Trust Launch Young Innovators' Programme 6 February 2018
Brighton & Hove Food Partnership launches 'Kit Out The Kitchen' crowdfunding campaign 2 February 2018
Brighton & Hove Council and Crest Nicholson win £15m government funding to kickstart King Alfred project 1 February 2018
Could a Utilise Plus Programme grant help you? 1 February 2018
Shoreham Port Facilitates Huge Operation