Food inflation is expected to climb to almost 4% by Christmas before reaching 6.4% next July, with conflict, extreme weather and rising production costs piling pressure on supermarket prices.
The warning comes from the Food and Drink Federation (FDF), which represents around 12,000 food and drink manufacturers.
While the latest forecast is significantly lower than the 9% inflation rate the organisation predicted for the end of this year in April, it warned that food inflation is expected to remain well above historical averages through the second half of next year.
The latest figures also highlight just how much grocery costs have already risen.
A £100 grocery shop in January 2020 would cost £138.60 today, representing a 38.6% increase based on the latest Office for National Statistics figures.
The FDF is forecasting that the same shop could rise by another £8.90 to £147.50 by July next year.
Why are food prices rising?
The FDF said “disruption is the new normal” as food manufacturers face a combination of geopolitical volatility, climate change and rising regulatory costs linked to packaging and recycling reforms.
It has called on the Government to ease pressure on manufacturers by tackling rising energy and regulatory costs, warning that “resilience is wearing thin”.
The FDF's latest Food Inflation Forecast says gas prices have more than doubled since February, while UK electricity prices remain among the highest in Europe.
UK diesel prices have also risen by 28.6% since the start of the conflict in the Middle East, adding further pressure to transport and logistics costs.
Meanwhile, climate-related disruption has pushed up the cost of key commodities.
The FDF said:
- Wheat is up 45%
- Cocoa has risen by more than 100%
- Rice is up 60%
- Sugar has risen by 27%
- Coffee is up 22%
Droughts across the UK and Europe this summer have added to the pressure, with manufacturers expected to face higher costs for fruit, vegetables and grains in the months ahead.
Food prices could keep rising into 2027
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.”
The warning comes after the National Audit Office said last week that the Government needs to work more closely with households, communities and industry to ensure the food supply chain can withstand increasingly likely and severe shocks.
These include extreme weather events, cyber-attacks and disease outbreaks.
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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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