Prices in UK shops rose at their fastest rate in more than two years in August, with higher costs beginning to put more pressure on retailers and shoppers.
Shop price inflation rose to 1.5% in August, up from 0.9% in July, according to the latest Shop Price Monitor from the British Retail Consortium (BRC) and NIQ.
It was the highest annual rate recorded since February 2024 and was also above the three-month average of 1.2%.
The increase was seen across both food and non-food goods. Food inflation climbed to 2.8%, from 2.2% in July, while non-food inflation rose to 0.9%, compared with just 0.2% a month earlier.
For retailers, the figures point to a more difficult cost environment heading into the autumn.
Food prices pick up
The rise in food inflation was not spread evenly across the sector.
Fresh food inflation eased slightly to 3% in August, from 3.1% in July. That left it broadly in line with its three-month average.
The bigger move came from ambient food, which includes products such as packaged and longer-life goods. Inflation in this category increased to 2.5%, up from 1.1% in July.
The BRC said higher energy, input and commodity costs were beginning to feed through to shop prices, particularly for ambient food, which often involves processing and imports.
Chocolate, sweets, fizzy drinks and coffee were among the products affected by the increase.
The BRC also highlighted higher prices for electrical goods, saying the continuing demand for memory chips and storage linked to the artificial intelligence boom was adding to costs in the sector.
At the same time, some retailers continued to hold down prices in areas such as clothing as they competed for shoppers.
Summer promotions also played a part
The latest increase does not mean every retailer suddenly raised prices.
Mike Watkins, head of retailer and business insight at NIQ, said the rise was not unexpected as some of the promotional activity seen during the summer came to an end.
Retailers are still competing heavily on price, particularly as households face higher energy and fuel costs.
That competition could become more important over the next few months. Retailers have to decide how much of their higher costs they can absorb and how much needs to be passed on to customers.
For consumers, even relatively small price increases can add up when they affect everyday purchases.
UK inflation is already moving higher
The latest shop-price figures come against a wider increase in UK inflation.
ONS data showed consumer price inflation rose to 2.9% in July, up from 2.6% in June. CPIH, which includes owner-occupiers’ housing costs, increased to 3.1%.
Housing and household services were a major factor behind the increase.
The ONS said the annual rate for housing and household services reached 4.1% in July, compared with 2.7% in June. Gas prices were 14.7% higher than a year earlier, with changes to energy tariffs following the latest Ofgem price-cap adjustment contributing to the increase.
The rise in household energy costs matters for retailers as well. Shops, warehouses, manufacturers and transport operators all have energy-related costs that can affect the final price of goods.
Bank of England expects inflation to remain elevated
The Bank of England’s July Monetary Policy Report projected that CPI inflation would average 3.2% in the final quarter of 2026, with the annual rate reaching around 3.2% in October and November.
The Bank also expects food price inflation to rise to around 3.5% in December.
That does not mean every food product will rise by that amount. Inflation measures the average change in prices across a basket of goods and services, so individual products can move very differently.
Still, the forecast suggests the recent easing in some price pressures is unlikely to translate into a quick return to the Bank’s 2% inflation target.
Energy remains an important risk
Energy prices are also an important part of the outlook.
The ONS said the July rise in household energy costs followed the change in the Ofgem price cap. It noted that the assessment period for the July-to-September cap included the first effects of the conflict in the Middle East on wholesale energy prices.
Cebr has also warned that the conflict could have a wider effect on household spending.
In an analysis published on August 31, the economic consultancy estimated that average UK real household incomes could be £1,100 lower in 2026 and £1,300 lower in 2027 than they would otherwise have been. Cebr said the combined effect would amount to £2,400 per household.
Those figures are forecasts rather than official government statistics, and the eventual impact will depend on how energy prices and the wider conflict develop.
What it means for retailers
For retailers, the latest numbers highlight a difficult balance.
They are facing higher operating and supply-chain costs while customers remain sensitive to prices. Passing all of those costs on could affect demand, but absorbing them can put pressure on profit margins.
The BRC said retailers were already dealing with high operating costs and warned that further increases could affect investment, jobs and prices.
The organisation has called for action on business costs, including business rates, packaging and employment taxes.
For shoppers, the immediate picture is mixed. Shop-price inflation at 1.5% remains well below the much higher rates seen during the cost-of-living crisis. But the direction has changed in recent months.
After a relatively subdued start to 2026, prices in shops are now rising faster again.
The outlook for autumn
August’s figures provide another sign that retailers are entering the autumn with costs still under pressure.
Food inflation has moved higher, non-food inflation has picked up sharply and household energy bills remain an important source of pressure.
The Bank of England expects overall inflation to remain above its 2% target later this year, while retailers are still competing to keep prices attractive for customers.
For businesses, the challenge will be finding a balance between protecting margins and keeping shoppers spending.
For households, the bigger question is whether the latest increase in shop prices marks a temporary summer effect or the start of a longer period of renewed price pressure.
For now, the BRC figures suggest retailers are facing a more difficult second half of the year.
This article is based on data and analysis from the British Retail Consortium, NIQ, the Office for National Statistics, the Bank of England and the Centre for Economics and Business Research.
