Food and drink businesses are set to face another make-or-break year in 2026, a recent report has stated.
According to IGD's latest Economic Viewpoint report, ‘What to plan for in 2026', retail food inflation is forecast to remain persistent, only easing slightly. At the same time, fragile shopper confidence, rising household taxes, and geopolitical risks all threaten economic recovery.
IGD warns that businesses must prepare for a volatile environment where affordability and selective indulgence will define consumer behaviour.
The Viewpoint report covers IGD’s predictions for what to expect for the economy, consumers and government policy in 2026, through the lens of the food system, including possible implications for businesses.
- Inflation Outlook: Retail food inflation expected to decline gradually (4.3 per cent in 2025, 3.8 per cent in 2026 and 3.3 per cent by 2027), but geopolitical shocks could trigger fresh price spikes.
- Consumer Pressure: 33 per cent of shoppers plan to cut back on grocery spend in 2026, up from 28 per cent in December 2024. For Away From Home, 45 per cent of consumers plan to cut back spend in the next few months, versus 46 per cent in December 2024.
- Tax Burden: Household taxation will rise further in 2026, limiting disposable income and reinforcing value-driven shopping.
- Opportunities: Despite caution, consumers will selectively trade up, especially during seasonal events like Christmas, creating growth pockets for businesses balancing value and premium.
James Walton, Chief Economist at IGD, said, “2026 will be a critical year for the food and drink industry. Businesses must stay relevant to value-conscious consumers while unlocking growth from resilient segments.
"Those able to deliver affordability alongside moments of indulgence will be best placed to succeed.”
By the end of 2026, the UK will be halfway through the current Parliament, Donald Trump will be halfway through his second term, and devolved governments could look very different.
Expect the Government to accelerate policies and regulatory changes shaping food policy, which are forces businesses cannot ignore.
Next year is likely to bring a push to implement key measures before the next General Election, with food policy influenced by both government priorities and external pressures, states the report.