High Street bosses have warned the war in the Middle East threatens to knock Britain’s economic recovery off course after a wet February dampened sales.
Conflict in the region has sparked fears of higher energy bills while prices at the petrol pumps have already started going up.
The retail sector is facing a similar situation to the aftermath of Russia’s invasion of Ukraine in 2022 and rising costs are likely to lead to higher prices in shops, according to the British Retail Consortium (BRC).
Andrew Opie, director of food and sustainability at the BRC, said there are ‘concerns’ among members about ‘the effect on inflation and overall pricing if energy costs remain elevated for an extended period’.
‘We saw this following the Russian invasion of Ukraine when higher energy prices drove up manufacturing costs. Since energy is a significant component of our production costs, sustained increases directly impact the prices of the goods we sell,’ he warned.
British High Streets are facing a combination of weak consumer confidence as well as fears over further pressure on prices amid the war in the Middle East
Retailers may also face delays in shipping goods if they have to be re-directed via longer routes, which Opie said could also result in ‘knock-on effects on availability and prices due to higher shipping costs’.
‘Amidst this volatile backdrop, it is more important than ever that Government keeps other inflationary pressures within its control to a minimum to protect households,’ he said.
Retailers face a cliff-edge in April when the Minimum Wage will increase while many shops will see their business rates rise too.
It comes as the sector is still reeling from wage hikes and higher national insurance contributions that came into effect last April.
Separate data from Barclaycard showed that four in five consumers are concerned about the impact of tensions in the Middle East on fuel costs, energy bills and inflation.
And three in five (59 per cent) are also concerned over a potential negative impact on their household finances.
Worrying predictions over prices and the consumer mood came as the BRC revealed that UK retail sales grew 1.1 per cent in the year to February, compared to the year before, below a 12-month average growth of 2.3 per cent.
Non-food sales fell 0.4 per cent in the year to February, as rainy weather deterred consumers from splashing out at the shops.
And while food sales rose by 2.9 per cent, they were driven by higher prices rather than people buying more.
Helen Dickinson, chief executive at the British Retail Consortium, said: ‘February’s grey, wet weather hit retail sales hard. Spending was weak across most categories, online and instore, as households pulled back after Christmas and January’s rebound.’
‘While retailers look to Spring and better weather to lift spirits and revive sales, conflict in the Middle East threatens knocking any recovery off course. Prolonged low consumer confidence adds strain on retailers already facing mounting cost pressures, higher taxes and a growing regulatory burden.’
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