FOOD INFLATION TO EXTEND INTO 2028, WARNS INDUSTRY GROUP

Food inflation will persist longer than previously anticipated, extending into 2028, according to the Institute of Grocery Distribution (IGD). The organisation forecasts food inflation will peak in the second half of this year at between 3.7% and 4.7%, before averaging 3.2% to 4.2% in 2025 and 2.3% to 3.3% in the first half of 2028. Households with children will require approximately £203 in additional spending on food and drink this year, with a further £207 needed next year compared with current prices. Despite a peace agreement announced by the US and Iran, geopolitical and energy pressures continue to affect food prices through delayed supply chain impacts.

The IGD's revised forecasts reflect more moderate energy prices than anticipated in March, though their effects will persist for an extended period. Energy costs directly influence every stage of food production and remain a primary driver of inflation. The retail cost of food is likely to be more than 40% higher than pre-Covid levels, the organisation stated. Food businesses face sustained margin pressure as a result of these overlapping economic pressures.

Consumer confidence remains weak, with the IGD's Shopper Confidence Index at minus two in May. Ninety-four per cent of consumers expressed worry about food prices, whilst 86% reported concern about energy bills. Food price concerns have reached their highest level in three years, surpassing anxiety levels recorded during the peak of previous cost-of-living challenges. Structural cost increases in energy, labour and policy, combined with climate-related supply risks, are expected to sustain inflationary pressure.