The cost of staples such as margarine and sugar has fallen, driving food prices up at their slowest rate in nearly two years and helping to push UK inflation down to 2.6% in June, according to the Office for National Statistics. The figure, down from 2.8% in May, comes as a welcome boost for new Prime Minister Andy Burnham, who has staked his government on cutting the cost of living. But analysts warn the reprieve is temporary: higher energy prices in July are expected to push inflation back up.
Supermarket price wars have been the driving force, the British Retail Consortium said, as retailers slash prices to tempt shoppers with summer deals. Food and non-alcoholic beverage inflation fell 0.2% month-on-month, with sugar, chocolate and confectionery seeing the steepest drops. Prices of oils, fats and dairy also fell compared with a year ago, while meat and vegetable rises were smaller than in 2023.
“UK inflation fell to 2.6% in June, driven by lower food and fuel prices, but analysts warn the drop is temporary.”
Lower fuel costs added to the downward pressure. Petrol prices at the pump dropped for the first time since the start of the war in the Middle East, after the US and Iran agreed to halt military operations and reopen the key Strait of Hormuz. Clothing costs also dipped thanks to summer sales, with retailers offering bigger discounts than last year.
“If retailers are to keep prices affordable for consumers in the long run, the Government needs to take practical steps to lower the everyday cost of doing business,” said Harvir Dhillon, economist at the BRC. “Andy Burnham has taken immediate action to ease pressure on household budgets; he must now look to do the same for businesses.”
Burnham has moved quickly: his government announced on Wednesday that the bus fare cap in England will return to £2 in January, and earlier confirmed that VAT on domestic electricity bills will be scrapped from October until the end of the year. Chancellor John Healey called the inflation figures “news families want to hear” but added “there is much more to do”, describing the bus and energy measures as “a win-win” that “help keep inflation down, while helping people afford the essentials.”
Yet the relief may be fleeting. Food inflation typically lags by up to 13 months due to supply chains, so any effects from the war in Iran could yet hit shelves. Meanwhile, the recent resumption of hostilities and a fresh jump in crude oil prices threaten to send inflation spiking again in the coming months.
