Inflation fell to 1.7% last month, dropping below the Bank of England’s 2% target for the first time in more than three years, according to the latest Consumer Price Index. However, food inflation saw an increase of 0.6 percentage points, rising to 1.9%.
The September CPI figure will determine next April’s increase to business rates, with the retail industry facing an estimated additional £140m in payments.
Business rates hikes have been “damaging investment and preventing the creation of new shops and jobs,” said Kris Hamer, director of insight at the British Retail Consortium (BRC). “This effect could be compounded if other business taxes are increased at the Budget,” he added.
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Lower transport costs were the big downward driver in Inflation last month, and offset the rise in food prices, which jumped 1.7% month on month, down from last month’s 2.2% rise.
Alcohol and tobacco inflation surged 4.9% while clothing an footwear inflation slowed from 1.6% to 0.8%.
October’s headline inflation figure, to be published next month, is likely to be closer to 3% due to Ofgem’s lifting of the energy price cap at the start of the month. This increase could potentially dampen real wage growth during the crucial Golden Quarter for retailers.
In light of these challenges, the BRC is calling on the Chancellor to introduce a Retail Rates Corrector – a 20% downward adjustment in business rates paid on all retail premises. Hamer explained that this measure would “redress the imbalance that sees retailers paying a higher proportion of their profits in taxes of almost any industry.”
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