The forecast indicated that food inflation could rise to 3.9% by December 2026, reach a high of 6.4% in July 2027 and remain above long-term historical norms throughout 2027.
According to the FDF, the outlook reflects the disruption caused by the conflict in Iran, alongside the effects of “extreme weather” on international food supply chains. Food manufacturers had made significant efforts to shield consumers from the initial impact of the Iran war, but the organisation warned that their resilience was “wearing thin”.
The FDF called on the Government to treat UK food security as a priority by easing immediate regulatory pressures. It said the inflationary consequences of the Iran war were likely to form a prolonged plateau, arriving later than the peaks seen after previous shocks such as the invasion of Ukraine, when food inflation exceeded 19%.
The FDF’s latest Food Inflation Forecast reported that gas prices had more than doubled since February 2026, based on ONS and MarketWatch data. UK electricity costs are also among the highest in Europe, creating concern because energy is essential throughout the food manufacturing and production process. Diesel prices in the UK have increased by more than a quarter (28.6%) since the conflict in the Middle East began.
The FDF said climate-related disruption was adding to the pressure, pushing up prices for a range of essential ingredients. According to the Bloomberg Agricultural Index, wheat prices have risen 45%, cocoa by more than 100%, rice by 60%, sugar by 27% and coffee by 22%. UK-grown produce has increased in price by almost 10% over the past year, according to Gov UK. Drought conditions across the UK and Europe during the summer have placed additional strain on supply, leaving food manufacturers facing further cost increases for fruit, vegetables and grains in the coming months.
Businesses throughout the food supply chain are changing their operating models to manage disruption, the FDF found. Measures include broadening supplier networks and making greater use of contract hedging. The organisation said these adjustments meant the extended inflation plateau was “likely to be repeated” following future shocks.
Government urged to pause plans to change promotion rules
The FDF estimates that five Government measures introduced in 2025 added £2 billion to sector costs. These included extended producer responsibility, higher employers’ NI contributions, changes to the Plastic Packaging Tax and new advertising restrictions.
Although many of these costs are now established, the FDF said the Government could still limit additional price increases and reduce the impact on consumers. It proposed targeted energy bill assistance for food and drink manufacturers, similar to support already available to other manufacturing sectors. The organisation also said ministers should focus on delivering existing packaging and recycling reforms effectively, which it claimed were “already adding billions” to the cost of producing food. It further called for a pause to proposed changes covering advertising and promotions, warning that implementation would require “significant resource” while the industry is already under considerable strain.
Karen Betts, chief executive of The Food and Drink Federation (FDF), stated: “Food and drink manufacturers have kept food prices as low as possible during the energy shock since the closure of the Strait of Hormuz, including by driving new efficiencies in their operations. But they can’t do this indefinitely. The persistently higher costs of energy, logistics and packaging, compounded by this summer’s extreme heat, mean that food prices will rise this year, and we believe that rise will be sustained into 2027.
“As the Prime Minister has recognised, households need some breathing space. Tackling the rising costs of food production will help with the cost of living, as well as giving businesses the confidence they need to invest in a resilient food system. Food manufacturing is embedded in every postcode in the UK, so ensuring our industry is fairly supported with energy costs will support growth and jobs everywhere. Ensuring regulation is proportionate and paced will drive down our rapidly rising compliance costs.
“By taking action, Government can take the heat out of food inflation, help keep a lid on the cost of the weekly shop, and signal to hard-pressed food manufacturers that they take food security seriously.”