Food inflation in the UK could hit 6.4% next July as higher energy, ingredient and transport costs feed through to manufacturers, extending the period of pressure on food prices.
The Food and Drink Federation (FDF) has forecast food and non-alcoholic drink inflation will reach 3.9% in December 2026, with inflation averaging 2.8% across the year.
The new forecast is a sharp reduction from the federation’s April outlook, when it expected food inflation to reach 9% to 10% by December 2026.
For 2027, the federation expects food and non-alcoholic drink inflation to reach 5.5%, with the rate peaking at 6.4% in July as manufacturers renew contracts at higher costs.
It has now called for measures to reduce costs facing manufacturers, warning that sustained increases could constrain investment, employment and the sector’s ability to absorb higher input costs.
Longer energy and commodity hedging arrangements have delayed the impact of higher input costs, while pressure on household budgets and retailer competition have limited manufacturers’ ability to pass on increases.
Gas prices have more than doubled since February 2026, while petrol and diesel prices have risen 22.7% and 28.6% respectively since the start of the Middle East conflict.
Agricultural commodity costs have increased, with wheat up 45%, sugar 27%, coffee 22%, cocoa more than 100% and rice 60% during 2026, while UK-grown produce is almost 10% dearer.
The federation warned that drought, El Niño, fertiliser disruption and interruptions to Black Sea grain shipments could tighten agricultural supplies and increase food inflation.
Rising costs are expected to feed through gradually as contracts expire, with manufacturers absorbing some increases because intense grocery competition and weaker household demand limit their pricing power.
The industry is facing higher taxes and regulatory costs, while food and drink manufacturing insolvencies were almost double their 2019 level in 2025 and employment fell 3.1% in the first quarter.
