The latest CPI inflation figures show headline inflation falling to 3.0% and food inflation falling to 3.6% in January, with furniture, household equipment and maintenance inflation at -0.5% YoY (from -0.6% in December 2025).
Harvir Dhillon, economist at the British Retail Consortium (BRC), comments: “Headline inflation stood at 3.0% in January, driven partly by food inflation easing to 3.6%, offering some relief for struggling households. Shoppers will have been pleased to see the price of clothing, footwear and furniture dropping significantly on the month as a result of heavy discounting by retailers during the January sales. And there was further good news for customers as staples such as bread, cereals and rice all fell in price on the month.
“This improvement reflects intense competition between retailers, who continue to try and absorb higher costs wherever possible to keep prices down for customers. However, margins remain razor thin and the cumulative burden of taxation and regulation on consumer-facing industries is rising. Retailers continue to face high labour costs, and the additional complexity associated with the Employment Rights Act risks adding to existing pressures. Without careful implementation, retailers’ ability to shield customers from higher prices, as well as to invest and create jobs, will be limited.”
Andrew Phillips, MD of V12 Retail Finance, comments: "The latest headline inflation figure, showing a steep fall to 3% in January, is a welcome sign that price pressures are gradually easing across the UK economy. However, it’s important to remember that while the rate of increase has slowed, the cost of living remains significantly higher than just a few years ago, with essentials like food, services and housing still rising faster than the headline rate. Core inflation, which strips out the volatile components including food, alcohol and tobacco, rose by 3.1% from December’s 3.2%.
"For retailers and their customers, this means that household budgets remain under pressure, and consumers are continuing to prioritise essential spending.
"Looking ahead, the prospect of a Bank of England interest rate cut could provide a much-needed boost to both consumer confidence and retail activity, particularly as unemployment has reached its highest level in nearly five years. Lower borrowing costs would help ease the burden on households and support retailers facing subdued demand. Nevertheless, the cumulative impact of inflation since 2021 means that affordability and flexibility remain top priorities for consumers."
