Food inflation set to surge next year as Iran war ramps up supply costs

Food inflation is projected to surge to 6.4% next year as the ongoing war in Iran increases supply chain costs, warns the Food and Drink Federation (FDF), a leading UK food industry body. The FDF has called on the government to assist in mitigating the impact of rising food prices, predicting a peak of 6.4% in July. Fuel prices, driven by the Iran conflict, are a significant factor in the escalating costs.

The FDF has forecast food inflation to hit 4% by December, a 6.4% increase from the current rate. The federation has identified several regulations as contributing to the heightened costs, including a £2bn hit in 2025 alone from regulations such as the renewable packaging levy, soft drinks levy, and new rules on less healthy food promotion.

Karen Betts, FDF chief executive, expressed concern over the government's inability to curb this "tsunami of legislation," which could deter manufacturers from investing in new UK supply chains and factories, thereby threatening food security. The FDF also highlighted rising wage costs as a driver of inflation, noting that the national minimum wage growth has consistently exceeded average wage inflation.

The trade body further criticized the government's plans to realign food safety standards with EU standards, deeming it underestimates the cost and complexity involved. The FDF has softened its earlier inflation forecast due to manufacturers signing longer-term fixed-price contracts for resources and energy, stemming from the inflation surge following Russia's invasion of Ukraine.

Food prices have risen by nearly 40% since 2020, resulting in a £100 weekly shop costing around £140 today and potentially reaching £150 next summer. The FDF emphasized the need for "joined-up" thinking from Whitehall and urged the government to alleviate the cost of living crisis by addressing the rising food production costs, which would also boost businesses' confidence to invest in a resilient food system.

A spokesperson for the Department of Environment, Food and Rural Affairs acknowledged the government's commitment to food security and its efforts to strengthen the UK's resilience, including supporting farmers and implementing measures to keep food prices down, such as suspending import tariffs on everyday goods.