UK food prices to hit 4% inflation by year-end, says FDF

Investing.com -- British food price inflation is likely to reach nearly 4% by the end of this year and surpass 6% by mid-2027, according to the Food and Drink Federation (FDF). The trade body attributes the projected increases to the ongoing U.S.-Iran conflict, drought conditions across Europe, and the El Niño weather pattern.

The FDF forecasts that prices for food and non-alcoholic drinks in December will be 3.9% higher than a year earlier. This represents a sharp downward revision from its previous estimate of nearly 10% inflation. The organization stated that prices will continue to rise after December, reaching a peak of 6.4% in July 2027.

Karen Betts, Chief Executive of the FDF, said food and drink manufacturers have kept prices as low as possible during the energy shock following the closure of the Strait of Hormuz, but they cannot sustain this approach indefinitely. She noted that persistently higher costs for energy, logistics, and packaging, compounded by extreme summer heat, will push food prices higher this year, with continued increases extending into 2027.

The FDF indicated that food inflation is likely to remain well above its historical average in the second half of 2027, featuring a lower peak but a longer plateau relative to its April forecast.

Data from the Office for National Statistics show that food and drink inflation fell to 1.3% in July, the lowest level since August 2024. Overall consumer price inflation rose to 2.9% in July.

The Bank of England considers food and energy prices to have a greater influence on household perceptions of inflation than other goods and services categories. The central bank expects food price inflation to reach 3.5% by December, while headline CPI is projected to climb to 3.1%.

Total food and drink prices have risen by nearly 40% since 2020, according to the FDF.

The trade body has urged the government to pause plans to restrict marketing of foods classified as unhealthy. It argued that higher payroll taxes and stricter advertising and packaging rules added £2 billion ($2.7 billion) to costs last year.

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