Scottish tax warning as shop prices set to rise

Trade leaders tell of underlying trend of building cost pressures

Shop prices in Britain fell through deflation last month, but retail trade leaders warned that cost pressures are likely to soon reverse the trend.

The British Retail Consortium reported overall shop prices deflation of 1.7% in January, an acceleration from the 1.4% fall in December.

Non-food deflation accelerated to 2.3% in January, deeper than the 1.9% decline in the previous month.

Food deflation accelerated to 0.8% last month from the 0.7% decline in December.

Fresh-food deflation remained at 1.2% for the third consecutive month, and ambient food moved back into deflationary territory.

British Retail Consortium chief executive Helen Dickinson said January bucked the monthly trend of an easing in shop price deflation.

She continued: “For now, consumers continue to benefit from falling shop prices year on year.

“Fluctuations in the monthly figures belie an underlying trend of building cost pressures that are gradually feeding through from the fall in sterling combined with higher commodity prices.

“This will inevitably mean we start to see a general upward trend in inflation over 2017.”

She said retailers’ focus will be on protecting their customers from the effects of increasing input costs.

With the cost of doing business rising and margins and profits being squeezed, their efforts will require the support of public policies that help them keep prices low for shoppers.

“This means capping the annual uplifts in business rates and ensuring no new tariffs remains a core objective of the negotiations on exiting the EU,” she stated.

Scottish Retail Consortium director David Lonsdale added: “Scottish shoppers continue to benefit from falling shop prices.

“The sustained period of lower shop prices is expected to end as the trend is towards building cost pressures feeding through into prices at tills over the coming months.

“This comes at a time when overall inflation is rising, and with household budgets facing increases in council tax and statutory employee pension contributions over the next year or so.”

He called on MSPs to carefully consider Scottish income tax rates in this week’s vote on the Scottish Government’s Budget.

Warning that raising personal taxes will add to the pressure on household disposable incomes, he said Holyrood should use its new powers to keep a firm grip on income tax rates.

Picture: PA. While shop prices in Britain fell through deflation last month, retail trade leaders have warned the trend is soon likely to be reversed by cost pressures.