UK retail prices rise fastest for decade

Shop prices in the United Kingdom accelerated at their fastest rate in more than 10 years last month, according to a closely watched measure.

The British Retail Consortium, or BRC and NielsenIQ Index showed retail price annual inflation surged to 1.8 percent in February, up from 1.5 percent in January. This is the highest rate recorded by the indicator since November 2011, the BRC said in a news release.

Fresh food price rises as well as health, beauty, and furniture prices contributed to the inflationary increase, said the BRC.

Helen Dickinson, the BRC's chief executive, said retailers were also being impacted by higher shipping rates, as well as labor shortages, commodity price increases and surging energy prices.

"Food inflation remained the key driver behind higher prices, particularly for fresh food, which has been impacted by poor harvests, both in the UK and globally," Dickinson said.

"There is little sign of change, with the Bank of England predicting price rises to continue until at least the spring."

The rise in shop prices adds to the cost of living pressure faced by British households already bracing for a major increase in energy bills next month.

Mike Watkins, head of retailer and business insight at research company NielsenIQ, said retail prices would likely continue to rise throughout the next few months.

"Inflation has increased since the start of the year and the underlying trend in shop prices will be upwards over the next few months," he said. "With falling disposable income for most households, retailers will need to keep encouraging customers to spend by offering choice and value and, for some, discounts as well as added benefits for loyal shoppers."

Dickinson added: "Price rises will be unwelcome news for households who already face falling disposable income because of the rise in national insurance and energy price caps."

The Bank of England is trying to tackle inflation with higher interest rates, and is predicted to raise borrowing costs for the third time in a row this month, noted the BBC.

In a response to a Treasury committee report into last year's budget, Chancellor of the Exchequer Rishi Sunak said on Wednesday that Britain's economy and public finances were "vulnerable" to higher inflation and interest rates.

Sunak "is not expected to make big changes to taxation or public spending" in his spring statement on March 23, said a report in the Financial Times. The chancellor was quoted as saying the government "can absorb some shocks and adjust fiscal policy as needed".