Retailers braced for the effects of the Middle East conflict have urged the Government to cut domestic costs to help them keep prices down for consumers.

The British Retail Consortium (BRC) said four in five people (80%) feared the Middle East conflict would push up food prices, and called on the Government to help by easing pressure on businesses from higher national insurance, packaging levies, new regulations, and business energy charges.

The BRC said retailers were already absorbing “significant” additional costs from the conflict including rising energy and shipping costs, with knock-on effects for fertiliser, manufacturing and logistics.

It warned those costs would inevitably filter through to the till over the coming months.

But it said the Middle East was only part of the picture, and retailers had absorbed £6.5 billion in extra employment costs from rising national insurance contributions and the national living wage, alongside a new packaging tax costing £1.6 billion.

Meanwhile, more regulatory “burdens” were imminent, including guaranteed hours provisions under the Employment Rights Act and the proposed reformulation of thousands of food lines under the new nutrient profiling model.

A survey for the BRC found 73% of people expect the Middle East conflict to raise the price of products other than food, while 81% are worried about rising energy bills, 76% about petrol and diesel, and 68% about tax increases.

Food retailers met Chancellor Rachel Reeves in early April and called for the removal of energy policy levies, network charges and system fees that now make up between 57% and 65% of a typical business electricity bill.

They also asked for the introduction of the updated nutrient profiling model for food and drink to be delayed, and for a review of the triple packaging levy, forecast to cost retailers more than £2 billion a year.

BRC chief executive Helen Dickinson said: “The Middle East conflict is driving up costs across the supply chain and families are right to be concerned.

“But not every pressure bearing down on retailers comes from the Gulf. Higher national insurance, packaging levies, new regulations, and business energy charges are all domestic policy decisions, made in Westminster, and they can be addressed there.

“Such action by government would help retailers to keep prices affordable for households.

“Other governments are already acting. Germany has reduced electricity costs for businesses by moving levies off bills and EU leaders are actively discussing similar responses to this crisis.

“The UK should be moving in the same direction, not treating global instability as cover for inaction on costs of its own making.

“Retailers are working hard to hold prices down, but they cannot do it alone.

“Every cost government chooses not to address is a cost that will find its way into someone’s shopping basket. That is a political choice, and it is one ministers still have time to change – but the window to act is closing.”

Britain’s long-term borrowing costs have surged to their highest level since 1998, driven by escalating inflation worries and political uncertainty ahead of this week’s local elections.

On Tuesday afternoon, the yield on 30-year UK government bonds, known as gilts, hit a 28-year peak, climbing 0.14 percentage points to 5.798%.

This increase in yield signifies a drop in bond prices, as the two move inversely. Consequently, the government faces higher expenses when seeking to borrow from financial markets.

The yield on 10-year gilts also rose, lifting by 0.15 percentage points to 5.122%, though this remains below recent highs reported last month.

In contrast, US 10-year treasury notes were flat on Tuesday, despite a steady increase over recent weeks.

Gilt yields have grown amid growing predictions that the conflict in Iran will drive higher inflation due to spiking energy costs, which is then likely to cause the Bank of England to increase interest rates.

City traders currently expect the central bank to vote for at least two interest rate hikes in the coming months, despite the Bank maintaining the current rate of 3.75% last week.

The rise in gilt yields means the Government will face higher debt interest costs, providing more strain on the Chancellor’s spending powers.

It comes amid a backdrop of significant pressure on Prime Minister Sir Keir Starmer in the run-up to the UK local elections.

The pound was broadly flat at 1.353 versus the dollar on Tuesday.