Food inflation to spike as suppliers can ‘no longer absorb’ costs, FDF warns
Food and drink inflation could climb to 5.7% by the end of the year thanks to cost pressures on manufacturers “trickling down” to supermarket shelves, a leading industry body has warned.
The Food and Drink Federation (FDF) said current prices were “steeper than anything in recent decades”.
The group – whose members make a quarter of all food and drink sold in the UK – increased its inflation outlook as a result of growing cost pressures.
It is now projecting inflation to reach 5.7% by December, having previously forecast the rate to be at 4.9% in September and 4.8% in December.
The group’s analysis of longer-term trends found that between January 2020 and July 2025, food and non-alcoholic drink prices increased by 37% – compared with 28% for overall prices.
Some products have seen particularly steep increases with sugar soaring by 56%, whole milk by 46%, and cheese by 31%, according to the analysis.
The FDF said that UK food inflation has been higher than other European countries in recent months, including France, Germany and Spain, indicating that domestic policies have played a key part.
It pointed to a higher rate of employer national insurance and new packaging taxes weighing heavily on the sector.
Food manufacturers have absorbed rising production costs over recent years but are increasingly have to pass it on to consumers through higher prices in shops, the FDF argues.
Liliana Danila, the FDF’s lead economist, said: “Looking at the longer-term picture, today’s prices are steeper than anything in recent decades.”
She added that spikes in energy and raw ingredients prices had now stabilised, meaning inflation was being “fuelled by the financial impact of domestic policies, now trickling down to supermarket shelves”.
FDF chief executive Karen Betts said the UK was an “outlier” against comparable European economies, adding: “The costs are such that companies can no longer absorb them and are having to pass at least some of them on to consumers.
“As this autumn’s Budget looms, it’s critical that Government does not add further to the already high costs of regulation in our sector.
“We’ve been hit by rising taxes, employment costs and a new packaging tax.
“We’re calling on Government to help us turn this tide by partnering with industry to attract investment, accelerate productivity growth, boost skills and grow exports across our sector.
“This will help counter inflation and secure a more resilient future for UK food and drink manufacturing.”
By Anna Wise, PA Business Reporter