UK shop price inflation ticked higher in December prompting warnings from retail leaders that price pressures are likely to persist into 2026 despite easing energy costs and improving supply conditions.
Figures covering 1–7 December 2025 show overall shop price inflation rising to 0.7% year on year, up from 0.6% in November and in line with the three-month average.
Food prices continued to be the main driver, with food inflation increasing to 3.3% from 3.0% the previous month. Fresh food inflation rose to 3.8%, while ambient food prices were up 2.5%.
Non-food prices remained in deflation at -0.6% year on year, unchanged from November, reflecting continued discounting in discretionary categories as retailers sought to stimulate consumer spending in the crucial Christmas trading period. Month-on-month, overall prices were flat.
DIVERGENT PATTERN
The latest data highlights the divergent pattern that has characterised the retail sector over the past year: essentials continuing to rise while many non-essential goods are discounted, leaving retailers managing tight margins and cautious consumers.
Helen Dickinson, Chief Executive of the British Retail Consortium, says: “Shop price inflation edged up in December as food prices rose at a faster rate. Nonetheless, shoppers still found plenty of value across many Christmas essentials including vegetables, cheeses, and alcohol, helping households to enjoy the festive season.
“Promotions were also widespread across popular gifting categories, including toys, books, and home entertainment.
“This year, retailers will continue to do all they can to keep prices down. While falling energy prices and improved crop supply should help ease some cost pressures, increased public policy costs and regulation will likely keep inflation sticky.
“2026 must be the year that Government works with business to create a policy environment that reduces the pressures bearing down on the industry.
“This will enable retailers to invest more in keeping their prices down, benefitting households all across the country.”
ONGOING CAUTION
Consumer behaviour over the Christmas period also reflected ongoing caution despite stabilising inflation and lower interest rate expectations.
Mike Watkins, Head of Retailer and Business Insight at NIQ, says: “This Christmas, shoppers remained cautious, prioritising affordability. Retailers worked hard to encourage spending by keeping supply chain price increases to a minimum, and many food retailers reduced prices in December to support demand.
“Looking ahead to 2026, although inflation has peaked, weak shopper sentiment is likely to persist, so shoppers will continue to seek out lower prices and promotional offers.”
With wage growth moderating and household budgets still stretched by housing and energy costs, economists expect price competition in the sector to remain intense.
Retailers now face the dual challenge of sustaining demand and absorbing rising regulatory and operating costs, even as headline inflation continues to ease.
