Are UK food prices really higher than Europe?

What’s happening? 

New data from ONS shows that “all items” inflation remained static at 3.8% year-on-year in September, measured by the CPI method. Most inflationary pressure came from services, rather than goods. 

Food and drink inflation fell from 5.1% in August to 4.5% in September. This is still well above the long-run average, and it means that food and drink prices are still rising, relative to other items shoppers buy.  

One month of data is not enough to establish a robust new trend, but this news is in-line with IGD’s previous forecasts, which anticipated inflation peaking at around 5% in late summer, before receding. 

Digging deeper, we can see that the broad inflation “push” seen previously in this market is becoming more specific and concentrated, with some items seeing rapid price growth, whilst prices for other items are settling.  

Beef, butter, chocolate and coffee, for example, are seeing very rapid price increases. These are mainly due to production issues: bad weather and disease in tropical nations that export coffee and cocoa, plus loss of capacity in the UK cattle supply chain. 

Elsewhere, it is hard to identify any areas where food prices are falling. Inflationary impetus may be fading primarily due to mathematical effects. 

Strong year-on-year price change is rarely sustained for more than a year, since factors driving change start to drop out of comparisons over time. 

The outlook then is for food prices overall to level off, rather than to fall. IGD expects food inflation to gradually decline to between 1.6% and 2.6% in 2026, and to 1.8% by mid-2027.

A slowdown in inflation is likely to be welcome for hard-pressed shoppers. Looking ahead, many inflation risks remain, however, including:  

• Commodity price shocks, either global or local 

• Currency value changes, which would drive up the cost of imports 

• Policy measures in the forthcoming Budget, especially those impacting labour cost 

Comparing food price levels across Europe 

Most of the forces driving food and drink inflation in recent years have been international, rather than specific to the UK and shoppers around the world have been impacted to varying degrees. 

This seems like a good time to take stock and to ask how the UK experience compares with other countries.  

Eurostat (the EU equivalent of ONS) offers good resources for this study, even though the UK dropped out of some measures following Brexit. 

This data shows that prices for farm commodities, labour and finished food goods have risen sharpy across Europe since war began in Ukraine and that changes in the UK are not out of line with “peer” countries. 

But what does this mean for food prices? Rooting through the Eurostat data, the UK is quite an expensive place to live, relative to the EU average, as shown in the chart below. However, this does not seem to apply to food and drink specifically. 

In the run-up to Brexit, food and drink prices in the UK were below the EU average. In the chart below, “100” represents the average price level and the UK was below this from 2016 to 2020. 

No Eurostat data is available from 2021 onwards, but IGD has used the same methodology and a comparable data pool to synthesise numbers for the post Brexit period. This data shows that the UK has remained relatively cheap since Brexit as well.  

Taking the comparison further, the chart below shows that food prices in the EU tend to be higher in the North and West, falling towards the East and South. UK food prices in 2024 were more like Eastern Europe than Western Europe. 

What does all this mean? 

So, its good news … kind of.  

The UK has seen sharp cost-of-living increases in recent years and big increases in the cost of food and drink in particular.  

This has, without doubt, created deep hardship for millions of shoppers – some of whom were struggling to start with. The social harm done should not be downplayed. 

However, UK shoppers have not experienced unusual difficulty. They share in a general wave of hardship which encompasses all of Europe.  

Now, with inflation fading, food and drink remains a relatively good deal in the UK, when compared across the European continent. 

But this has not been achieved without cost inflicted elsewhere in the food supply chain. Margins for businesses at all points remain under severe pressure, restricting the ability to reward workers and invest in future production.  

Protecting shoppers 

This inflation spike - and the one that came before it – reveal that the global and local food supply chains have serious weaknesses. They are exposed to climate change, geo-politics, disease and other forces.   

All these things can hit supply, causing prices to spike violently and unpredictably. The only way to protect shoppers from this is to invest in expanding UK production capacity and – where possible – bringing production to the UK. 

IGD’s recent Viewpoint Special report Driving growth through a thriving food system explores the key opportunities for development – poultry and horticulture – and consider policy measures that might unlock growth potential.