Middle-class households could soon face higher prices at the shops as retailers begin using artificial intelligence to personalise what customers are charged.
The change means people may no longer pay the same price for the same item.
Economists at the Bank of England said the technology allows retailers to adjust prices based on a shopper’s financial situation and spending habits.
Writing on the central bank’s blog, researchers Anthony Savagar, Misa Tanaka and Jagdish Tripathy explained that these AI systems can charge different prices depending on what customers are willing or able to pay.
“This may lead to higher price dispersion as individuals with high willingness-to-pay subsidise those with lower willingness-to-pay,” they said.
In practice, this could see better-off households, including many middle-class families, paying more so others can pay less.
The expansion of big data capabilities and enhanced computing power has enabled an increasing number of businesses to adopt these algorithmic pricing tools, adjusting costs swiftly in response to shifting market conditions and consumer profiles.
Electronic shelf labels represent one key technology driving this transformation, allowing retailers to modify prices almost instantaneously based on supply and demand fluctuations.
Middle-class customers risk paying more for their shopping
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PAResearch conducted in the United States demonstrates that shops there already vary what they charge depending on a customer’s location.
Beyond geographic factors, companies are also investigating fully personalised pricing that considers individual interests and behaviour. Someone identified through streaming data as a devoted fan of a particular band, for instance, might face higher prices for that group’s merchandise.
Clare Lombardelli, a senior Bank of England official, voiced “concerns about fairness” earlier this month as dynamic pricing technology edges closer to appearing in supermarkets.
The potential shift comes as British consumers already contribute substantially to supporting those on lower incomes through existing discount schemes.
Bank of England economists said retailers can adjust prices based on a shopper’s finances and spending habits
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PAA February report from the think tank Onward calculated that Britons spend approximately £10bn annually on subsidies for Universal Credit recipients through various concessions.
These include discounted broadband packages, reductions in council tax bills, and exemptions from prescription charges, with those paying standard rates effectively covering the difference.
Benefit claimants also receive significant savings on leisure activities, including visits to attractions such as London Zoo, Westminster Abbey and the Tower of London, where families can secure discounts worth up to 96 per cent.
Savagar cautioned that the proliferation of electronic and algorithm-based pricing mechanisms could amplify the severity of inflationary episodes, with costs climbing almost instantaneously rather than gradually.
The warnings come amid broader concerns about the future direction of consumer prices in Britain
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PAThe economist also warned that these automated systems might drive even steeper price increases during periods when inflation is already elevated, as algorithms could prompt retailers to “raise markups more aggressively when inflation is already high”.
This technological shift in how prices are determined represents a significant change from traditional retail practices, where adjustments typically occurred more slowly and uniformly across customer bases.
The warnings come amid broader concerns about the future direction of consumer prices in Britain.