Supermarket shoppers across the UK are facing renewed pressure on their budgets this Christmas, as industry leaders warn that food inflation is set to rise and persist for several years.
The Food and Drink Federation (FDF) predicts that food inflation will reach almost 4 per cent by the end of this year, before peaking at 6.4 per cent in July 2025. While this year-end forecast is lower than the 9 per cent anticipated in April, the trade body cautioned that inflation is expected to remain significantly above historical averages through the second half of next year and into 2027.
Recent figures from the Office for National Statistics (ONS) highlight the cumulative impact of rising prices, showing that a grocery shop costing £100 in January 2020 now stands at £138.60 – an increase of 38.6 per cent. The FDF forecasts this bill will climb by an additional £8.90, or 6.4 per cent, to £147.50 by July next year.
Representing 12,000 food and drink manufacturers, the FDF stated that "disruption is the new normal" for the sector. This ongoing volatility is attributed to a combination of geopolitical instability, the impacts of climate change, and a "pile up" of regulatory expenses, particularly those linked to packaging and recycling reforms.
The federation has urged the government to provide relief from escalating energy and regulatory costs faced by manufacturers, warning that "resilience is wearing thin" across the industry.
Its Food Inflation Forecast detailed significant cost increases: gas prices have more than doubled since February, UK electricity prices are among the highest in Europe, and UK diesel prices have risen by 28.6 per cent since the start of the conflict in the Middle East.
Climate-related events are further exacerbating the situation, leading to substantial increases in global commodity prices. The cost of wheat has risen by 45 per cent, cocoa by over 100 per cent, rice by 60 per cent, and both sugar and coffee by 27 per cent and 22 per cent respectively. Droughts experienced across the UK and Europe this summer have also strained supplies, indicating that manufacturers will incur higher costs for fruit, vegetables, and grains in the coming months.
Karen Betts, chief executive of the FDF, commented on the situation, stating: “Food and drink manufacturers have kept food prices as low as possible during the energy shock since the closure of the Strait of Hormuz but they can’t do this indefinitely.”
She added: “The persistently higher costs of energy, logistics and packaging, compounded by this summer’s extreme heat mean that food prices will rise this year, and we believe that rise will be sustained into 2027. As the Prime Minister has recognised, households need some breathing space. Tackling the rising costs of food production will help with the cost of living, as well as giving businesses the confidence they need to invest in a resilient food system.”
The National Audit Office (NAO) recently issued its own warning, stressing the importance of closer collaboration between the government, households, communities, and industry to ensure the food supply chain can withstand increasingly probable and severe shocks. These potential disruptions include extreme weather events, cyber-attacks, and disease outbreaks.
In response to such concerns, Environment Secretary Dame Angela Eagle last week suggested that households should consider stocking up on food to prepare for extreme weather, telling The Guardian that the El Niño weather pattern is expected to lead to "more extreme storms in this country.”
A spokesperson for the Department for Environment, Food and Rural Affairs (Defra) addressed the issue, saying: “The prime minister has made clear that food security is national security and we are working with farmers and the food and drink industry to strengthen the UK’s resilience.”
They further stated: “We know that many households are still feeling pressure from the cost of living which is why we are taking a range of actions to keep prices down, including suspending import tariffs on everyday goods and supporting farmers hit by the recent drought.”
