UK shop price inflation hits two-year high in August

The pace of price rises in UK shops rose to its highest level in two years in August, a trade body index shows, with higher energy costs pushing up the price of food and AI chip demand making technology more expensive.

In-store inflation stepped up to 1.5% year on year in August, up from 0.9% in July, led by prices for tinned and packaged food which increased by 2.5% against 1.1% in the prior month, according to data from the research company NIQ for the British Retail Consortium.

Inflation for fresh produce remained high at 3%, amid pressure on growers from the hot dry summer plus hefty fuel and energy costs. However, that marked a slight easing off from the 3.1% recorded in July,

Helen Dickinson, the chief executive of the consortium, said: “The impact of higher energy, input and commodity costs is beginning to filter through into prices, particularly for ambient foods which are typically imported and processed.”

“In non-food, electrical prices rose amid the ongoing AI boom, which is forcing up the price of memory chips and storage. Meanwhile, retailers kept clothing prices low to offer value for families getting ready for the new school year.”

“The months ahead look challenging for households, with rising bills putting further pressure on budgets.”

Mike Watkins, head of retailer insight at NIQ, said he expected price competition between retailers to intensify in the autumn months as businesses competed to attract families concerned about potentially higher energy bills.

However, Dickinson said companies were facing “persistently high operating costs” that limited their ability to absorb price rises. She added: “If the government is serious about supporting growth while keeping the cost of living in check, it must address the cost of doing business, including by tackling the growing burden of business rates, packaging and employment taxes.”

The evidence of higher shop prices comes after the boss of Asda said he was seeing inflation on some fresh food begin to rise after a hot dry summer that affected crop yields.

Cereals including wheat and barley were hit particularly badly, according to the Agriculture and Horticulture Development Board. Its first harvest report of 2026 said the hot weather had resulted in the earliest harvest since records began in 2006.

The rise in shop price inflation adds to the challenge for Andy Burnham’s government in achieving its aim of granting “breathing space” to hard-pressed households

Wider consumer price inflation across the UK rose to 2.9% in July with the Iran war affecting energy prices, according to the latest figures from the Office for National Statistics. The agency said inflation rose from a 15-month low of 2.6% in June, driven by more costly gas and electricity.

Despite government measures to ease electricity costs, households in Great Britain face the sharpest summer increase in energy bills in four years.