Bulletin: Ceasefire, but inflation forecasts unchanged

Middle East briefing

Ceasefire, but inflation forecasts unchanged for now.

A two-week ceasefire in the Middle East has reduced immediate fears of military escalation, triggering a fall in oil and gas prices and lower short-term volatility in energy markets. However, IGD has not reforecast food inflation at this stage, because:

• Energy prices remain well above pre-conflict levels

• Underlying geopolitical risks are still elevated

• For the food system, sustained energy costs – not short-term price moves – shape inflation risk, particularly as hedges unwind and contracts reset.

As a result, risks to food inflation in 2026 remain.

See our latest article: Middle East ceasefire: impact on food inflation forecasts

IGD opinion

While a ceasefire has eased immediate market pressure, the ceasefire remains fragile. Continued Israeli strikes in Lebanon and disruption in the Strait of Hormuz mean energy and shipping risks persist, limiting scope to revise food inflation forecasts.

Conflict shakes shopper confidence

The Middle East conflict has hit UK consumer sentiment via energy costs and inflation expectations. IGD’s shopper data shows a quick confidence shock, raising the risk of earlier value-seeking even before changes fully reach shelf.

• IGD’s Shopper Confidence Index declined to -4 (from 1 in Feb), the lowest level since August 2023

• Food price expectations: 80% expect food prices to rise (vs 72% in Feb)

• Financial confidence: 37% expect to be worse off (from 25% in Feb)

See our latest article: Middle East briefing: the conflict has reshaped consumer expectations.

IGD opinion

The ceasefire may calm markets, but the confidence shock has already landed. With price expectations rising, shoppers are likely to shift into value-seeking earlier. Retailers and brands must defend trust with simple, credible value and affordable healthy cues.

Cost squeeze intensifies

Farm input cost inflation is accelerating, with agflation reaching 7.6% in March, according to the Andersons Centre. Input costs are now rising far faster than CPI, while agricultural output prices have fallen year on year, renewing pressure on farm profitability.

Fertiliser, fuel and energy costs are key drivers, linked to global energy market disruption. This cost squeeze echoes IGD’s Food Pound analysis, which shows that across nine everyday food products, the entire supply chain generated just 29p of profit on a £20.24 basket (around 1.5%), leaving limited capacity to absorb further shocks.

See the Viewpoint Special report: Where does your food pound go?

IGD opinion

IGD’s Food Pound work shows margins across the food system are already exceptionally thin. With little financial headroom, rising input costs quickly translate into pressure on resilience, investment and long-term supply stability.

Labour: The operational risk leaders can’t ignore

Labour shortages are increasingly becoming an enterprise-wide operational risk across the food and drink supply chain. Workforce pressures are no longer confined to HR teams and are now affecting core business performance.

• Labour constraints are impacting costs, service levels and resilience

• Workforce issues receive less leadership focus than technology

• Automation, flexibility and role redesign have helped, but are reaching their limits

• Many roles remain difficult to automate

A ‘quiet crisis’ is building as these pressures become harder to contain.

See our latest article: Labour: The operational risk leaders can’t ignore

IGD opinion

Labour should now be treated with the same strategic importance as technology. Workforce shortages are a material operational risk, and incremental adaptations alone will not deliver long-term resilience for the food system.

Scaling food fortification impact

 Food fortification has played a significant role in improving public health. New analysis shows its impact could be scaled even further through improved compliance and coverage. Fortification remains one of the most cost-effective ways to address micronutrient deficiencies, with the benefits disproportionately benefitting lower income communities.

• Fortified foods already help address common nutrient gaps

• Impact depends on coverage and compliance

• Greater collaboration across industry and government could unlock wider health gains

See our latest article: Scaling the impact of food fortification

IGD opinion

Food fortification works, but its impact is constrained by inconsistent delivery. There is an opportunity to strengthen fortification as part of a broader, system-wide approach to health, scaling benefits and tackling persistent health inequalities.

Grocery regulator moves department

Responsibility for the Groceries Code Adjudicator (GCA) will transfer from the Department for Business and Trade to Defra from July 2026. The change aligns oversight of retailer–supplier relations more closely with wider food and farming policy. The GCA will retain its independence, powers and remit, continuing to enforce the Groceries Supply Code of Practice between large grocery retailers and their direct suppliers.

EU trade rules update

The UK is progressing plans for a new Sanitary and Phytosanitary (SPS) agreement with the EU, aimed at simplifying agrifood trade. If agreed, it would reduce checks and paperwork for food and agricultural goods, including movements involving Northern Ireland. Businesses would need to follow relevant EU rules covered by the agreement. A call for information is open to understand impacts and support needs ahead of potential implementation from mid 2027.