Food inflation is expected to reach almost 4% by Christmas, and peak at 6.4% in July next year, as pressures from conflict and extreme weather reach supermarket shelves, the industry has warned.
The Food and Drink Federation (FDF) acknowledged that its figure was significantly lower than the 9% it predicted in April for the end of the year, but warned inflation was set to remain significantly above historical averages for the second half of next year rather than dissipate.
A £100 grocery shop in January 2020 would cost £138.60 today – a rise of 38.6%, based on latest Office for National Statistics figures.
The FDF said it is forecasting this will rise another £8.90 or 6.4% to £147.50 by July next year.
The FDF, which represents 12,000 food and drink manufacturers, said “disruption is the new normal” because of geopolitical volatility, the impacts of climate change, and a “pile up” of regulatory costs around packaging and recycling reforms.
It has called on the Government to ease pressure by relieving rising energy and regulatory costs on manufacturers, warning “resilience is wearing thin”.
The FDF’s latest Food Inflation Forecast says gas prices have more than doubled since February, while UK electricity prices are some of the highest in Europe, and UK diesel prices have also risen by 28.6% since the start of the conflict in the Middle East.
Meanwhile, climate-related events were compounding problems, with the cost of wheat up 45%, cocoa more than 100%, rice up 60% and sugar and coffee up 27% and 22% respectively.
Droughts across the UK and Europe this summer have further strained supplies, meaning manufacturers would face higher costs for fruit, vegetables and grains in the months ahead.
FDF chief executive Karen Betts 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 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.”
Last week, the National Audit Office warned that the Government must work more closely with households, communities and industry to ensure the food supply chain can withstand increasingly likely and severe shocks including extreme weather events, cyber-attacks and disease outbreaks.
Environment Secretary Dame Angela Eagle later suggested households stock up on food to prepare for extreme weather, telling the Guardian that El Nino will lead to “more extreme storms in this country”.
A Department for Environment, Food and Rural Affairs (Defra) spokeswoman said: “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.
“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.”
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