Food inflation is set to extend into 2028, much longer than previously anticipated, according to industry leaders. The Institute of Grocery Distribution (IGD) has warned that households with children will need to find approximately £203 extra for food and drink this year, followed by an additional £207 next year compared to current prices.
Revised Forecasts and Energy Impact
In March, the IGD presented two scenarios for food inflation—moderate and severe—based on energy prices, which directly influence all stages of food production. The severe scenario predicted an 8% peak, but energy costs have been more moderate than expected, though the impact will last longer. The IGD now forecasts food inflation to peak in the second half of 2026, averaging between 3.7% and 4.7% over the 12 months.
Geopolitical and Supply Chain Pressures
Despite a peace deal announced by the US and Iran, the effects on food inflation are feeding through with a time lag. Geopolitical tensions, energy costs, and supply chain disruptions are overlapping, leading to sustained margin pressure for food businesses and ongoing uncertainty for shoppers. The IGD expects food inflation to average 3.2% to 4.2% in 2027 and 2.3% to 3.3% in the first half of 2028.
Long-Term Price Rises
These figures follow a sustained rise in prices that began in 2021. The IGD suggests that retail food costs could be more than 40% higher than pre-COVID levels. The IGD's Shopper Confidence Index remained subdued at minus two in May, with 94% of consumers worried about food prices and 86% concerned about energy bills. Food price concerns have reached their highest level in three years, surpassing even the peak of the cost-of-living crisis.
Expert Commentary
James Walton, IGD chief economist, stated: "The impact of geopolitical conflict usually takes time to filter through to raised food prices. Therefore, despite the peace deal announced by the US, we expect food inflation to peak at 5.5% due to the disruption already experienced. Energy, labour, and policy costs are continuing to build gradually, with many becoming structural rather than easing quickly, as well as climate risks which can affect supply. This keeps sustained upward pressure on prices, which is expected to continue into 2028." He added: "While inflation may not peak as high as the most severe scenario, there is little room for relief as prolonged pressure will continue to weigh on both industry and household budgets, with an extra £203 to find this year for households with children. The businesses that pull ahead in this environment will be the ones building resilience and making sharper choices while uncertainty is still unfolding."
