UK consumers likely to face higher prices ‘for many months to come’

UK consumers face the prospect of higher prices for many months as economic disruptions from the Iran conflict continue to drive up costs for businesses, according to new industry data [1]. Shop price inflation rose to 1.2% year-on-year in May, driven by significant increases for furniture and health and beauty products [1]. Food price inflation was lower at 2.7%, below the longer-term average of 3.1%, due to intense supermarket competition [1]. However, Helen Dickinson, chief executive of the British Retail Consortium (BRC), warned that 'significant cost pressures, including higher energy bills and disruption linked to the conflict in Iran' risk pushing prices higher as businesses cannot absorb costs indefinitely [1]. The conflict's primary economic channel is the disruption of global energy supplies. The closure of the Strait of Hormuz, a passage for around 20% of the world's oil trade, has led to a large disruption in global oil supplies and rising prices [2]. Oil prices are a key determinant of global supply and demand pressures [3]. A survey by the British Chambers of Commerce (BCC) found 80% of UK companies report an existing or likely future impact from the conflict, with manufacturing hardest hit: 68% of firms are already affected and a further 23% expect future impact [1]. William Bain, head of trade policy at the BCC, stated, 'Even if the current ceasefire soon signals the end of the conflict, the economic reverberations will be felt for many months to come' [1]. The crisis has led to broader concerns about inflation and heightened risks of stagflation and recession globally [2]. This comes as the UK, a nation with a long economic history as a former industrial and commercial powerhouse, navigates renewed external shocks [5]. Both business groups have called for further government support, citing the lack of an energy price cap for firms and the burden of taxes and levies [1]. The government has pointed to existing schemes aimed at reducing electricity costs for manufacturing and energy-intensive businesses [1].