Bulletin: Budget preview and higher food inflation

What to look out for in the 2025 Budget

With less than one week to go until the Chancellor delivers the 2025 Budget, food businesses will be scrutinising potential measures that could:

• Add cost pressures to the supply chains, influencing food inflation

• Impact household finances, which could affect consumer spending patterns

• Signal longer-term policy changes, shaping costs well into 2026

Key areas to look out for include:

• National Living Wage increases and consequent increases in pension and NI costs, since these are connected to pay

• The Employment Rights Bill – the impact of which will increase the cost and complexity of employing people, even for more advanced businesses

• Business rate adjustments - affecting large retail properties and other properties higher in the supply chain

• Changes to taxation for consumers including the freezing of income tax thresholds

IGD opinion

Measure in the Budget have the potential to add costs for food businesses. It will mean that cost management will remain a critical focus for food businesses into 2026. While the Budget will dominate short-term planning, other factors, including the compliance costs from Extended Producer Responsibility (EPR) and future Deposit Return Scheme (DRS) rollout in late 2027, will continue to exert pressure beyond 2025.

Higher food inflation

Latest ONS data shows that CPI inflation for food and non-alcoholic drinks increased from 4.5% in September to 4.9% in October. This follows a decline last month. All items inflation has continued to weaken, falling from 3.8% year-on-year in September to 3.6% in October,

The increase in food inflation was driven by ongoing strong price increases in:

• Bread and cereals (especially specialised bakery products)

• Meat (especially beef)

• Chocolate and confectionery (especially chocolate)

See our latest article: Food inflation: Eyes on the Budget

What does this mean for food inflation going forward?

IGD’s next food inflation forecast will be published in a Viewpoint Special report issued on 28 November, following the Budget.

IGD opinion

One month does not signal a new trend, and competitive forces should limit further increases before Christmas.

Barring any major surprises, it is likely that average inflation will still be roughly 4.0% over the course of the full year.

Food Inflation Gateway

The Environment Secretary has announced that Defra will be working with DBT and across government to introduce a Food Inflation Gateway.

This will assess the impact of government regulations on food businesses and their impact on food prices. By introducing new requirements, removing duplication, and streamlining regulation where possible the aim is to reduce unnecessary costs for food businesses.

Import tariffs update

The Environment Secretary has announced that “Defra, DBT and HMT have come together to launch a process to identify new business tariff suspensions”.

Businesses will be able to tell the government “Which tariffs will be most helpful to suspend in order to reduce your costs.” The aim is to “remove tariffs on ingredients that British companies need that we don’t produce domestically.”

Legal migration changes

The Home secretary has announced that the UK is introducing a new legal migration model aimed at reducing net migration and focusing on skills. It includes:

• Higher salary thresholds: The minimum salary for Skilled Worker visas will rise significantly, making lower-paid roles ineligible.

• Skills-based approach: The system will prioritise high-skilled roles and reduce reliance on lower-skilled migration.

• Settlement changes: Migrants will need 10 years (up from 5) to qualify for permanent residency.

• Compliance and enforcement: Tougher checks and stricter rules for employers sponsoring workers.

• Objective: Encourage domestic recruitment and ensure migration supports economic growth.

IGD opinion

This new initiative is intended to reduce inward migration and – if enforced effectively – it should work. However, the practical economic effect depends on the ability of the UK education system and labour market to make up the difference.

If inward migration falls and local workers are not able to step into the gap then the result will be higher wages and labour shortages. So, much will depend on the ability of UK education and training to deliver the skills needed and the willingness of local workers to engage.

For the food industry, where many roles fall below new pay limits, this could mean tougher recruitment, higher costs, and pressure to invest in automation or upskilling. Labour shortages risk disrupting supply chains and driving up costs, making workforce strategy a critical priority.

IGD’s schools programme reaches thousands of young people annually and helps to raise the appeal of working in food by showcasing the variety of attractive, long-term, and fulfilling careers we have to offer, including priority roles in technical, engineering, and digital. Contact the team at [email protected] to explore how taking part can help attract your future workforce.

UPF study

A new three-paper series in the Lancet states that “The displacement of traditional dietary patterns by the ultra-processed (UPF) pattern is a key driver of the pandemic of chronic diseases”. The papers detail the policy asks, and the commercial determinants and corporate power, respectively. 

The papers call for several policy asks including:

• Front-of-pack warnings

• Higher taxes on UPF products

• Help in funding access to more nutritious foods

• Marketing bans aimed at children,

The third paper states “"Reducing the industry's power in food systems involves strongly disincentivising UPF production, reducing the power of marketing, and redistributing resources to other types of food producers; excluding the UPF industry from food governance.”

IGD opinion

IGD research shows that shoppers need clearer information and practical support to understand UPFs. Without this clarity, there is a risk that the UPF debate will dominate food system discourse at the expense of, at least, equally pressing issues. 

Download the report: Ultra processed foods: A consumer perspective.

2026 trends

Discover the key drivers influencing the UK market and how businesses can prepare for the year ahead. This includes:

• Context for the trends - Understand the political, economic, health, and sustainability backdrop for the UK in 2026 and how this has informed our trends.

• Four additional reports exploring the trends driving choice and growth across key UK food sectors including Grocery, Shoppers, Away From Home and Food To Go. See here for more details.