Shoppers were today warned that food price inflation will pick up pace again next year to reach nearly 5% in a new cost of living squeeze.
A prediction from a leading industry body said food prices will rise by 4.9% in 2025 meaning that grocery bills will have shot up 40% since 2020.
The Institute of Grocery Distribution (IGD) said the latest surge in food price is mainly due to higher labour costs resulting from the increase in the National Living wage and higher National Insurance bills coming into effect next year.
IGD’s latest Viewpoint Special Report “Hungry For Growth” highlights food inflation as one of the biggest challenges for UK households in 2025.
It said the extra costs will hit food businesses in three phases during 202. April will see National Insurance and National Living Wage hikes coming into force, followed by higher food import costs in July as a result of the implementation of the Windsor Agreement framework with the EU, and then in October the first payments are due to fall on Extended Producer Responsibility (EPR), increasing costs on packaging
IGD estimates that food production sector will only be able to absorb between 20% to 40% of these costs meaning the remainder will be passed onto the consumer.
Food inflation is likely to continue to exceed inflation in other items, not just in 2025 but also 2026.
IGD chief economist James Walton, chief economist, IGD, said: “We do not see food prices going down in the foreseeable future. The rising cost of living, combined with increased employment and regulatory costs, will keep inflation elevated. Consumers will undoubtedly look for ways to save money, but the impact of these cost pressures will be felt across the economy.
“For the food sector, the increased financial burdens are becoming harder to absorb, particularly for smaller players in the sector. The cumulative impact of multiple changes landing within a short period of time will drive significant cost into all food businesses across the UK.”
Food inflation peaked at 19.2% in October 2022 when the energy crisis triggered by Russia’s full scale invasion of Ukraine sent bills soaring. However, it has subsided back to around 1.5% in recent months.
