Household budgets will face a “significant challenge” with food inflation expected to surge to 6% by the end of the year, experts have predicted, as they issued a stark warning to Rachel Reeves. The British Retail Consortium (BRC), which has more than 200 major retailers as members, warns The Chancellor has to decide between backing the high street or “fanning the flames of inflation”. According to the BRC, two-thirds of chief financial officers (CFOs) are expecting to see more price rises.

A survey by the BRC, whose figures currently put food inflation at 4%, found that around 56% of retail finance chiefs feel “pessimistic” about trading conditions over the next 12 months. The overwhelming majority, around 85%, said their firms had been forced to hike prices as a consequence of Reeves’ last budget increasing employer national insurance and the national living wage. 65% predicted more rises were ahead in the coming year.

The BRC said the predicted rise to 6% “will pose significant challenges to household budgets, particularly in the run-up to Christmas”.

BRC CEO Helen Dickinson said: “Retail was squarely in the firing line of the last Budget, with the industry hit by £7 billion in new costs and taxes.

“Retailers have done everything they can to shield their customers from higher costs, but given their slim margins and the rising cost of employing staff, price rises were inevitable.

“The consequences are now being felt by households as many struggle to cope with the rising cost of their weekly shop.

“It is up to the Chancellor to decide whether to fan the flames of inflation, or to support the everyday economy by backing the high street and the local jobs they provide,” she added.

The latest ONS inflation data showed prices for food and non-alcoholic beverages rose by 4.5% in June this year. It marked the third consecutive increase in the rate this year, and the highest recorded since February last year.

However, The Office for National Statistics (ONS) reported that retail sales volumes increased by 0.9% in last month, following a downwardly revised 2.8% drop in May.

Demand for both non-alcoholic and alcoholic drinks increased in the hot weather, while motor fuel sales saw their largest jump in over a year as Britons “ventured out.”

June marked the first of three summer heatwaves, with temperatures topping 33C, and was followed by another heatwave at the end of the month. However, the sales rebound was smaller than the 1.1% increase most economists expected.

The ONS said food stores saw sales rise 0.7% month-on-month in June, which followed a 5.4% fall in May. It added: “This rise was mainly because of improved sales volumes in supermarkets, with some retailer comments mentioning increased sales of drinks because of the warm weather.”

However, Philly Ponniah, chartered wealth manager at Philly Financial, said: “The 0.9% rise after May’s sharp decline reflects weather-boosted purchases rather than fundamental economic strength.

“While supermarkets saw stronger trading and fuel sales rose as people got out in the sun, this doesn’t signal broader resilience. The underlying consumer picture remains tough, with stretched household budgets and stubborn inflation pressures still in play.”

The Treasury has been approached for comment.