Higher prices could continue through the summer even if ceasefire talks between the US and Iran succeed, consumers have been warned, as economic effects are expected to last for many months. Disruption to global shipping routes, along with rising energy and raw material costs, have increased expenses for UK firms, and these costs are already appearing in retail prices, according to recent inflation data. Retailers have introduced promotions to attract shoppers, yet businesses report growing difficulty in avoiding price rises and have urged the government to provide further support beyond current steps. Shop price inflation has increased, according to data from the British Retail Consortium. Furniture and health and beauty items have seen some of the largest rises recently, contributing to a 1.2% year-on-year increase in shop prices in May, slightly above the three-month average of 1.1%. The BRC pointed to high oil prices and the extended closure of the Strait of Hormuz shipping route as key factors. Bargains remain available on televisions and audiovisual equipment as retailers target football fans preparing for the World Cup in the US next month. Strong competition among supermarkets has limited food price inflation, which dropped to 2.7% in May, below the longer-term average of 3.1%. While some promotions may continue through the summer, the trade body expressed concern about the outlook for cost-conscious consumers. Retailers are working to limit price increases but face ongoing cost pressures from higher energy bills and conflict-related disruption in Iran, said Helen Dickinson, the BRC chief executive. Businesses cannot absorb these costs indefinitely, raising the risk of higher prices in coming months. She called for cuts to taxes and levies that form two-thirds of company energy bills, along with reduced regulation. Only 16% of businesses report no impact from the Middle East turmoil following US and Israeli actions in Iran, according to a separate British Chambers of Commerce report. Despite early ceasefire signs from weekend talks, the group expects lasting effects. Even if the ceasefire ends the conflict soon, economic effects will persist for many months, said William Bain, head of trade policy at the BCC. The geopolitical situation has shifted with no quick resolution. Uncertainty over the Strait of Hormuz remains a major concern for UK firms using that route. BCC research showed 80% of companies face current or expected impacts from the conflict, with energy price rises, shipping issues and higher raw material costs as main worries. Manufacturing has been most affected, with 68% of firms already impacted and 23% expecting future effects. Three-quarters of companies anticipate higher energy bills in the next year, and over a third warned they may struggle to pay. Like the BRC, the BCC requested government support. Consumers will soon receive clarity on energy costs, but businesses lack a price cap, Bain said. While some relief exists for high energy users, most UK firms remain exposed to global market volatility. Ministers should consider funding renewable levies on business bills, launch a national business energy advice scheme and strengthen protections against unfair pricing. In the medium term, faster grid reform, better energy storage and incentives for electrification are needed to protect the economy from price shocks. A government spokesperson said many businesses face difficulties and the Middle East situation is adding to costs. The new British industrial competitiveness scheme will reduce electricity bills by up to 25% for over 10,000 manufacturers, while the supercharger scheme will cut costs for hundreds of energy-intensive businesses. New support for chemicals and ceramics was announced last week, and the government continues working with businesses and unions to provide assistance during challenging times.
