Food and non-alcoholic drink inflation is expected to reach 3.9% by December 2026, according to the latest Food Inflation Forecast from Food and Drink Federation (FDF).
While this is significantly lower than the 9% predicted by the trade body earlier this year following the outbreak of the Middle East conflict, it now forecasts a longer-lasting period of high inflation.
The ongoing US-Iran war and climate-related events, including El Niño and this summer’s droughts, mean the surge in inflation is predicted to continue well into next year, peaking at 6.4% in July 2027. It is then forecast to remain significantly above historical averages for the second half of next year.
FDF noted that food manufacturers have worked hard to absorb the initial shock of the Iran war and protect consumers from price rises.
However, after six years of turbulence and disruption, they can’t continue to absorb such a wide range of cost pressures. As a result, the inflationary fallout is expected to be a longer plateau and will come later than previous shocks, such as the invasion of Ukraine, when food inflation peaked at over 19%.
FDF highlighted that food prices have risen by nearly 40% since 2020.
A £100 weekly shop in 2020 would cost nearly £140 today and will approach £150 by next summer because of this pressure on the food system. Food and drink manufacturers are calling on government to act now to safeguard the nation’s food security and give consumers some breathing space by relieving rising energy and regulatory costs that risk pushing prices even higher.
FDF’s latest Food Inflation Forecast details that gas prices have more than doubled since February while UK electricity prices are some of the highest in Europe.
This significantly affects the sector, as energy is required at every stage of the food production process, from farms to factories. Diesel prices in the UK have also risen by more than a quarter (28.6%) since the start of the conflict in the Middle East.
Meanwhile, climate-related events are compounding these problems, causing the cost of many key ingredients to skyrocket. Wheat is up 45%, cocoa over 100%, rice 60%, sugar 27% and coffee 22%, while produce grown in the UK has increased by almost 10% in the last year.
Droughts across the UK and Europe this summer have put further strain on supply, meaning manufacturers will also face higher costs for fruits, vegetables and grains in the months ahead.
FDF noted that businesses across the food system are adapting their ways of working, including diversifying supply chains and hedging their contracts more, to be better able to weather disruptions. As a result, it’s likely that the change in inflationary pattern to a longer plateau is likely to be repeated for other shocks.
“Food manufacturers are the shock absorbers of the food system, positioned between the farmers and retailers and ensuring that everyone has access to a wide range of affordable food,” the trade body said.
“However, a decade of climate and geopolitical shocks, combined with the steady build-up of complex and costly regulatory pressures, is driving up the cost of food in the shops.”
In 2025, FDF estimates that five government regulations alone added £2bn of costs to our sector. While many costs are baked in, it says that the government should act now to keep a lid on further price rises and protect consumers from a more severe hit.
For example, by offering targeted support with energy bills for the sector, which other manufacturing industries already receive.
FDF also wants the government to prioritise effectively implementing their current packaging and recycling reforms, which are already adding billions to the cost of making food, while pausing the “complex and unenforceable plans” to change advertising and promotion rules, which would take significant resources at a time when the sector is already stretched.
Karen Betts, the trade body’s Chief Executive, commented: “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.”