UK food inflation could hit nearly 5% in 2025, says industry researcher

London: British shoppers face renewed pressure next year with food prices set to rise by up to 4.9%, mainly driven by higher costs for businesses caused by measures in the government’s budget, a prominent grocery industry researcher said on Thursday.

The Institute of Grocery Distribution (IGD) forecast 2025 food inflation in a range of 2.4% to 4.9%.

UK food price inflation reached its highest since 1977 in March 2023 at over 19%. It has since slowed and was 1.9% in October this year, official data showed.

While energy and commodity prices will be a little higher in 2025, the IGD said, there will be significantly increased employment and regulatory costs for food businesses.

They will face higher employment costs from April due to increases in National Insurance – or social security – contributions and the minimum wage announced in the new Labour government’s October budget.

The budget has been heavily criticised by corporate Britain, which has warned it will be inflationary.

Next July, food businesses also face higher import costs, mainly caused by the delayed final phase of post-Brexit border changes kicking in that will see more checks of fruit and vegetables entering the UK from the European Union.

Higher packaging costs will follow in October due to regulatory changes.

The IGD said the food sector would only be able to absorb between 20% and 40% of these costs, meaning the remainder will be passed onto consumers.

“The rising cost of living, combined with increased employment and regulatory costs, will keep inflation elevated,” said James Walton, IGD chief economist.

“Consumers will undoubtedly look for ways to save money, but the impact of these cost pressures will be felt across the economy.”
The Bank of England said last month it expected annual food price inflation to average 1.1% across the following six months.

Its forecast for overall average inflation for 2025 is 2.75%.