The chairman of the British Retail Consortium has warned that retailers are set for higher shop prices in the wake of the Brexit vote, thanks to the devaluation in the pound.
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Speaking at the BRC’s Brexit debate, chaiman Richard Baker said that while some retailers had absorbed the shortfall initially, they would be unable to do so for much longer. “Inflationary pressure is building in the system,” he said. “While retailers are famous for their ability to manage cost increases without passing them on to customers, it’s not realistic to think that the devaluation will not, in due course, make itself felt in higher shelf prices.”
“We can be sure that there is upward pressure on shop prices in the pipeline,” he added. “It will not be possible for retailers to absorb all of the increase costs of the sterling devaluation indefinitely, and we expect some degree of pass-through to shop prices, probably focused in the first half of next year.”
Baker also noted that shop price deflation and slowing real wage and employment growth had “strengthened the headwinds facing the industry,” before the Brexit vote.
He warned that although effects had yet to be felt from the referendum, the retail industry must expect to feel the consequences in the coming months. “We can’t say we’ve avoided any significant economic consequences of the referendum – only that the potential impacts have not yet had time to filter through into sales,” he said.
“Brexit is not a “normal” economic event so it’s difficult to calibrate any model of the future with confidence. If anecdotal reports of postponed investment do become firm evidence of a widespread phenomenon and current independent forecasts for a significant slowdown in economic growth next year are realised, then that will certainly feed through into consumers’ wallets and ultimately to retailers.”