Food industry calls on government to 'intervene now' to prevent food inflation spike

The food industry is calling on the government to “intervene now” to prevent food inflation surging as a result of the ongoing conflict in the Middle East, before it is “too late” to support consumers and businesses.

Industry body the Food and Drink Federation (FDF), which represents 12,000 food and drink manufacturers, said the energy price shock caused by the effective closure of the key shipping channel the strait of Hormuz risks pushing food price inflation higher unless action is taken.

The FDF forecast at the start of April that prices will rise by at least 9% by the end of the year, almost tripling a forecast of 3.2% made before the conflict in the Middle East began. That estimate was based on the assumption that the strait would be reopened by this week.

Given the uncertainty over further peace talks, and following comments by president Donald Trump on Tuesday that he did not want to extend the ceasefire with Iran, the FDF indicated that the projected inflation figure could rise even higher.

Karen Betts, chief executive of the FDF, stated, "We can see inflation coming down the pipe because energy is embedded in every part of the food system.

"There are things you can do to help the industry right across the board on energy, but you need to act quickly because if you don’t get that in as inflation starts to build, then it’s going to be too late. It will have started to work its way through the system and ultimately into prices.”

Betts added that the government lacked a sense of “urgency” to deal with the expected food price spike.

"There is opportunity for government to intervene now. Food price inflation will impact headline inflation, which will then impact interest rates...

"It seems to us that there is a moment now where we can look at how we can mitigate the situation we’re in and make sure we don’t have a very unpleasant peak.”

Food prices are already 40% higher than they were five years ago, Betts said. She added that the challenges of the past few years, including the surge in energy costs and corresponding rise in food prices following Russia’s invasion of Ukraine had left many food and drink manufacturers less able to absorb higher costs.

Betts said ministers could decide to “mitigate energy costs ... to take the heat out of food price inflation”.

She said she understood the challenges of the government’s fiscal position, and the FDF had made suggestions on how to support food and drink manufacturers through “targeted intervention”, as well as pausing some of the new regulations facing manufacturers including new packaging and recycling rules and changes required as the UK prepares realign its food standards with those of the EU as part of a sanitary and phytosanitary (SPS) agreement.