Markets · Read NewsLONDON, Sept 9 (Reuters) - British food price inflation is likely to climb to nearly 4% by the end of the year and exceed 6% by the middle of 2027 due to the ongoing impact of the U.S.-Iran war, drought in Europe, and the El Niño weather pattern, according to the Food and Drink Federation (FDF). The FDF forecast that prices for food and non-alcoholic drinks in December would be 3.9% higher than the year before, down from a previous forecast of nearly 10% inflation. However, prices are expected to continue rising, peaking at 6.4% in July 2027.
Karen Betts, Chief Executive of FDF, stated that while manufacturers have kept food prices low during the energy shock, they cannot sustain this indefinitely due to persistently higher costs of energy, logistics, and packaging, compounded by extreme heat this summer. Food inflation is expected to remain significantly above historical averages in the second half of 2027, with a lower peak but a longer plateau than previously forecast in April. Office for National Statistics data showed food and drink inflation in July fell to 1.3%, the lowest since August 2024.
The Bank of England views food and energy prices as critical in shaping households' perceptions of inflation. Overall consumer price inflation rose to 2.9% in July, with the BoE forecasting food price inflation at 3.5% by December and CPI at 3.1%. Since 2020, food and drink prices have risen nearly 40%.
The FDF urged the government to reconsider plans to restrict marketing of unhealthy food and highlighted that higher payroll taxes and tighter advertising and packaging rules added £2 billion ($2.7 billion) in costs last year.
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