Food and drink prices forecast to soar as costs mount

Food and drink prices in the United Kingdom are set to rise faster than previously anticipated, with the Food and Drink Federation now projecting inflation to reach 5.7 per cent by the end of 2025. The revision comes in the wake of escalating commodity prices and the impact of new government levies, which continue to strain the sector’s manufacturing costs.

The latest figures reveal a stark increase in staple food costs since 2020. Prices for whole milk have climbed by 46 per cent, sugar by 56 per cent, cheese by 31 per cent, and flour by 19 per cent. This surge has largely been propelled by a 51 per cent rise in the overall cost of agricultural commodities between 2020 and 2023.

On top of higher input prices, food and drink manufacturers are contending with rising employment costs, notably from increases to employers’ national insurance contributions—an additional expense estimated at £410 million, according to the British Retail Consortium. Manufacturers are also grappling with the introduction of a packaging tax, which is projected to cost the sector £1.1 billion in its first year alone.

Liliana Danila, lead economist at the Food and Drink Federation, noted that price growth has shown no sign of abating. She highlighted that today’s food and drink prices are higher than at any point in recent decades, with the current five-year average outpacing the rates recorded between 1990 and 2010 by more than double.

Karen Betts, chief executive of the federation, expressed concern at the persistent nature of UK food price inflation, describing the nation as an “outlier” compared to European counterparts. The absence of recent shocks to energy or commodity markets has not translated into relief for the sector. With the cost burden proving too great to absorb, many businesses now have little option but to pass at least some of these increases on to consumers.

The industry is now lobbying the government ahead of the upcoming autumn budget, advocating for measures to counter relentless inflation and bolster the long-term resilience of UK food and drink manufacturing.