The British Retail Consortium said shop prices eased by 1.7 percent year-on-year in March, the smallest fall since August 2015, slowing from a 2.0 percent drop in February.

The decline in non-food prices slowed in March, easing an annual 2.6 percent last month from a 3.0 percent decrease in February. Food prices declined 0.4 percent year-on-year for the second straight month.

The fall in overall shop prices was "a result of continuing intense competition and retailers ongoing investment in price," said BRC chief executive Helen Dickinson.

"Despite consumer confidence remaining at zero, a relatively benign economic environment and a fiercely competitive market will see retailers continue to respond to their customers with prices and promotions to maintain market share as the Spring season kicks off."

Even though consumers are still benefiting from record low interest rates, negligible inflation and subdued oil prices, analysts worry they could be affected by the weaker global economic outlook and a possible exit from the European Union.

Britain will hold a vote on its EU membership on June 23.

Britain's economy has been one of the fastest growing in recent years among advanced economies, but slowed in the second half of 2015.

(Reporting by Ana Nicolaci da Costa; Editing by Andy Bruce)

((ana.dacosta@thomsonreuters.com; +44 207 542 7748))