January 2025's widespread sales featured substantial savings for consumers particularly in the fashion category as UK shop price deflation slowed and costs rose.

According to the British Retail Consortium (BRC)-Nielseniq Shop Price Index, deflation was recorded at 0.7%, a slight improvement from the 1.0% deflation observed in December 2024. 

The figure for January surpasses the three-month average deflation rate of -0.8%.  

Non-food items continued to experience deflation, registering at -1.8% in January, a marginal increase from -2.4% in December, and just above the three-month average rate of -2.0%. 

BRC chief executive Helen Dickinson said: “While overall prices fell in January, the pace of shop price deflation eased. Extensive January sales was good news for bargain hunters, with non-food products showing significant discounts, particularly for furniture and fashion, but less good news for retailers needing to shift excess stock.”  

Mike Watkins, NielsenIQ Retailer and Business Insight head said: “Shoppers continue to be unsure about spending and many are seeing a continued squeeze on their household incomes. So we expect non-food retailers to still promote and food retailers to still offer price cuts over the next few weeks, with shoppers managing their budgets by shopping smart and shopping around for wherever the savings are the most attractive.” 

Food inflation decelerated to 1.6% in January, a decrease from 1.8% in the preceding month and falling below the three-month average rate of 1.8%.  

Since the commencement of 2024, the annual rate has seen a substantial reduction. 

Within the food category, fresh food inflation also experienced a slowdown to 0.9% in January from 1.2% in December, slightly beneath the three-month average rate of 1.1%.  

Ambient food inflation saw a decline to 2.5% from November’s 2.8%, positioning it below the three-month average rate of 2.7% and marking its lowest point since February 2022. 

Dickinson added: “This month’s figures also showed early signs of what is to come, with month-on-month food prices rising at their fastest pace since April last year. Ambient food saw a 1% jump as prices spiked for sugary products, chocolates and alcohol.  

“Price cuts and deflation may not last much longer as retailers will soon feel the full impact of £7bn ($8.71bn) of new costs announced at the last Budget. Higher employer National Insurance Contributions, increased National Living Wage, and a new packaging levy mean that prices are expected to rise across the board. Government can help to mitigate the impact on consumers by ensuring its proposed reforms to business rates do not result in any store paying more in rates than they already do. Without action, UK households will feel the effects.” 

Recently, Dickinson warned that UK retailers are bracing for a cost surge in 2025 due to the budget’s impact, fuelling expectations of higher retail prices.