In its updated forecast, the FDF said food inflation is expected to reach nearly 4% by Christmas, peak at 6.4% in July 2027, and remain above historical averages throughout 2027.
This latest rise is a direct result of the ongoing conflict in Iran, according to the FDF, which is calling on Downing Street to “act now” to curb further price rises and protect consumers from a more severe hit.
The body does, however, recognise that many of these costs are already baked in and that the impact of extreme weather this summer has proven to be another seriously destabilising factor for the global food supply chain.
The FDF added that although manufacturers have acted to help protect consumers from inflationary shocks over the past few months, they will need direct government support going forward to help safeguard the UK’s food security.
To ease pressures on food manufacturers, the trade body is also urging the government to pause its “complex and unenforceable plans to change advertising and promotion rules”, which it says would take “significant resource at a time when the sector is already stretched”.
The scale of the challenge is highlighted by figures provided by the FDF, which show food prices have risen by nearly 40% since 2020. The organisation said rising energy and fuel costs are likely to push prices higher still as manufacturers seek to protect margins.
The widespread onset of climate instability has created a further headache for British food businesses, which have seen the cost of many staple ingredients rise sharply.
Wheat prices are up 45%, cocoa prices are up by more than 100%, rice 60%, sugar 27% and coffee 22%, while produce grown in the UK has increased in price by almost 10% over the past year.
The drought in Europe this summer is also expected to contribute to rising fruit and vegetable prices because of reduced supply.
Karen Betts, chief executive of the Food and Drink Federation, said: “Food and drink manufacturers have kept food prices as low as possible during the energy shock since the closure of the Strait of Hormuz, including by driving new efficiencies in their operations. But they can’t do this indefinitely. 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. Food manufacturing is embedded in every postcode in the UK, so ensuring our industry is fairly supported with energy costs will support growth and jobs everywhere. Ensuring regulation is proportionate and paced will drive down our rapidly rising compliance costs.”
She added: “By taking action, government can take the heat out of food inflation, help keep a lid on the cost of the weekly shop, and signal to hard-pressed food manufacturers that they take food security seriously.”
