Food prices set for prolonged rise as UK inflation heads higher

Food price inflation in the UK is expected to rise to nearly 4% by the end of 2026 and exceed 6% by mid-2027, driven by the continuing effects of the US-Iran war, drought in Europe and the El Niño weather pattern, the Food and Drink Federation (FDF) said.

The industry body forecast that prices for food and non-alcoholic beverages will be 3.9% higher in December than a year earlier. The projection is significantly below its previous forecast of nearly 10%, but the FDF expects food prices to continue rising into 2027, with inflation reaching a peak of 6.4% in July.

"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," FDF Chief Executive Karen Betts said.

"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," she added.

The FDF said food inflation is likely to remain well above historical averages through the second half of 2027, with a lower but more prolonged peak than previously forecast in April.

Data from the UK Office for National Statistics showed that food and drink inflation fell to 1.3% in July, its lowest level since August 2024. However, overall consumer price inflation rose to 2.9% that month.

The Bank of England expects food price inflation to reach 3.5% by December, while overall consumer price inflation is projected to rise to 3.1%.

Food and drink prices have increased by nearly 40% since 2020, according to the FDF. The organization has also urged the government to suspend plans to restrict the marketing of foods classified as unhealthy.

The FDF said higher payroll taxes, along with tighter advertising and packaging regulations, added £2 billion ($2.7 billion) to industry costs last year.

By Vafa Guliyeva