Food and drink inflation could hit 5.7% by the end of the year, FDF warns

Following several months of high inflation rates, the Food and Drink Federation (FDF) has upgraded its food and non-alcoholic drink inflation forecast, projecting that it could reach 5.7% by December. This is up from its previous forecast of 4.8%.

Between July 2020 and July 2025, food and drink prices rose 37%. This is significantly higher than overall UK inflation, at 28%. In particular, milk, cheese and sugar have seen some of the steepest increases:

Initially this trend has been driven by surging production costs. Over the first three years of this decade, agricultural commodity prices rose by 51%, while UK gas prices quadrupled. However, despite most of these costs stabilising in 2024, food and drink inflation has persisted at well above the average rate through 2025. The rate of rising food prices in the UK has also outpaced other European countries. By July, UK food inflation stood at 4.9%, far higher than in France (1.8%), Germany (2.7%), or Spain (2.8%).

This shows that a key driver of food inflation in the UK is the cost of government regulation and policy decisions. This includes changes to employer National Insurance Contributions, costing the food and drink sector £410m¹ a year, and £1.1bn for the new packaging tax, Extended Producer Responsibility (EPR).

Dr Liliana Danila, Lead Economist, The Food and Drink Federation said:

“Food and drink inflation has been climbing steadily all year, with no sign of easing. Looking at the longer-term picture, today’s prices are steeper than anything in recent decades. The five-year average is running at more than double the rate seen between 1990-2010.  

“Inflationary spikes between 2020 and 2023 were driven by geopolitical shocks which created supply chain disruptions and sharp rises in energy and raw ingredients. With most of these costs now stabilised, this new inflation surge is fuelled by the financial impact of domestic policies, now trickling down to supermarket shelves.”

Over recent years food manufacturers have absorbed rising costs to ease the pressure on shoppers at the tills. Average production costs increased 6.3% last year, well above the rate of inflation. However, having faced such a long period of cost pressures, price rises have eventually made their way to supermarket shelves. Households spend £70.50 a week on food and drink, nearly double the £38.50 spent on energy². This shows the weight these rises will have on households, who can’t easily cut back on this essential spend.

Karen Betts, Chief Executive, The Food and Drink Federation, said:

“UK food price inflation is running persistently high.  It’s an outlier against comparable European economies and it’s persisting in the absence of energy or commodity shocks. The costs are such that companies can no longer absorb them and are having to pass at least some of them onto consumers.

“As this Autumn’s Budget looms, it’s critical that government does not add further to the already high costs of regulation in our sector. We’ve been hit by rising taxes, employment costs, and a new packaging tax. We’re calling on government to help us turn this tide by partnering with industry to attract investment, accelerate productivity growth, boost skills, and grow exports across our sector. This will help counter inflation and secure a more resilient future for UK food and drink manufacturing.”

Action government can take to support the food and drink manufacturing sector

Food and drink manufacturing has a £14bn growth opportunity that could be unlocked with policies to incentivise investment in the sector. This could include supporting more automation and tech adoption alongside, the transition to a higher skilled workforce by delivering on the flexibility promised in the Growth and Skills Levy.

Additionally, government must bear down on existing cost pressures. For example, the £1.1bn fees for the EPR scheme must be used to boost recycling rates, so that producers aren’t hit with higher bills in coming years. This could also include not increasing the current rates that industry pays on taxes such as the Soft Drinks Industry Levy.

With 42% of the food we eat imported, ensuring that the food and drink industry’s interests are represented as negotiations for a renewed trade agreement with the EU progress will help to slow rising costs in coming years. Whilst the negotiations continue, it’s also important that there’s consistency at borders so no further unnecessary burdens are put on businesses.

-Ends-

Notes to Editors

Read the FDF’s Food and Drink Inflation Forecast report.

1. Source: British Retail Consortium, Labour costs will harm employment
2. Source: ONS, Family spending in the UK: April 2023 to March 2024

About FDF

The Food and Drink Federation (FDF) gives a voice to the food and drink manufacturing industry – the UK’s largest manufacturing sector. We contribute over £38 billion to the country's economy, supporting half a million jobs and driving growth at home and abroad.

For further enquires please contact the FDF Press Office or contact 020 7420 7140