London, Jan 28, 2026, 09:38 GMT — Regular session
- Tesco shares edged up 0.1%, fluctuating earlier between 418.5p and 423.2p
- UK shop-price inflation surged at its quickest rate since February 2024, according to BRC data
- The Bank of England’s rate decision is due Feb 5, followed by Tesco’s earnings report in April.
Tesco shares crept up 0.12% to 420.5 pence in early London trade on Wednesday, bouncing within a range of 418.5p to 423.2p earlier. Trading was subdued, as investors digested new UK pricing data ahead of the upcoming Bank of England decision.
Grocers face a clear dilemma: will higher shelf prices return? While a price boost could push up revenue, it also strains household budgets and may compel supermarkets to spend more to hold onto market share.
UK shop prices climbed at their fastest annual rate since February 2024 in January, the British Retail Consortium reported Tuesday. The shop price index recorded a 1.5% year-on-year rise, with food prices jumping 3.9% — the largest increase since October — while non-food prices edged up 0.3%. “Any suggestion that inflation has peaked is simply not borne out by these figures,” BRC chief executive Helen Dickinson said, citing high business energy costs and the recent National Insurance hike as key drivers. Reuters
For Tesco, rising food inflation cuts both ways. It usually boosts the total at checkout, yet it can also steer customers toward cheaper options and ramp up price wars with competitors, particularly if wages lag behind.
Rate expectations are shaping the outlook. According to a Reuters poll, the Bank of England is set to keep its benchmark rate steady at 3.75% during the Feb. 5 meeting. A narrow majority of economists anticipate the next cut will come in March. “The bank will want to take a wait-and-see approach,” said Sanjay Raja, Deutsche Bank’s chief UK economist, as policymakers balance inflation risks with signs of stronger economic activity. Reuters
Cost pressures are still a hot-button issue. This week, the government unveiled a package to ease upcoming business rates hikes targeting pubs and live music venues. The deal features a 15% discount and a two-year freeze, responding to strong pushback from the sector over soaring property-tax bills.
Tesco’s latest update earlier this month confirmed that price wars are still biting. The group expects full-year adjusted operating profit near the top of its 2.9 billion to 3.1 billion pound forecast, following a 3.2% rise in underlying UK sales during the crucial Christmas stretch. Chief executive Ken Murphy called the competition “as intense as ever.” Reuters
There is a risk, though. Should food inflation remain stubborn and labour plus energy costs continue rising, Tesco faces a tough choice: either cut prices to hold volumes or raise them to safeguard margins. Neither option is easy, particularly with discounters ready to pounce.
Investors are focusing on central bank cues and upcoming earnings reports for guidance. Tesco is scheduled to release its full-year results on April 16.
