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Bulletin: Drought, growth and food prices

07 August 2026 | Michael Freedman

Including drought, resilience, NEETs, food prices, growth, the Budget and Middle East developments.

Drought exposes growing food system resilience challenge 

England has entered drought status across several regions following one of the driest and warmest periods on record, with reservoir levels, river flows and soil moisture under increasing pressure.

The NFU has warned that prolonged dry weather is making food production more difficult, risky and costly, calling for urgent action to strengthen water resilience and support investment in storage infrastructure.  

Recent analysis from ECIU suggests the economic impacts are already emerging, with the UK's 2026 harvest on track to be the worst on record since 1984. The report estimates the impact of lower crop yields could cost the arable sector between £305m and £390m compared with earlier forecasts. For food businesses, the challenge is no longer simply managing weather volatility, but adapting supply chains and infrastructure to a more unpredictable climate 

Read IGD's latest resilience report, Thriving in a volatile world 

In the report climate change ranked as the second greatest risk in 2026, but IGD believes it presents the biggest long-term challenge because it amplifies existing pressures across food production, water, nature, infrastructure and food safety. 

Tackling inactivity could unlock growth and future talent 

The government's Keep Britain Working review says helping more people remain in or return to work represents a major economic opportunity, describing it as "growth hiding in plain sight". The review highlights the significant economic cost of inactivity and argues that employers have a central role in creating more inclusive workplaces and improving access to employment. For the food industry, the challenge extends beyond economic inactivity to a growing number of young people who are not in education, employment or training (NEET), at a time when many businesses continue to face workforce shortages and skills gaps. 

See our recent article From NEET to food careers: turning insight into action 

IGD opinion  

Helping more young people into work is both a social and economic opportunity. Through Feeding Britain's Future, businesses can help build future talent pipelines while supporting more young people into meaningful careers across the food system. 

Chancellor warns against supermarket profiteering  

The Chancellor, John Healey, has warned that he will not allow supermarkets to take consumers “for a ride” as conflict in the Middle East continues to put pressure on energy, fuel and food costs. He said he would monitor for “any suggestion” of profiteering and stressed that regulators have the powers to act against any evidence of “price-gouging” at the till or the pump.  

While there is currently no evidence of profiteering, the comments have renewed debate about the drivers of food inflation, with retailers arguing that rising operating costs, including energy, labour, taxes and transport, remain the primary pressures on prices. 

IGD opinion

IGD's Where does your food pound go report found that a £20.24 basket of nine everyday grocery items generated just 29p of profit across the supply chain. The evidence suggests higher food prices are primarily driven by rising costs rather than excess profits. 

Budget date confirmed as focus turns to growth 

The Chancellor has confirmed that the next Budget will take place on 28 October 2026. With UK economic growth remaining subdued and borrowing costs elevated, attention is increasingly turning to how the government can support investment while remaining within its fiscal rules. 

Recent reports suggest ministers are exploring ways to use existing flexibility in the fiscal framework to increase spending on areas such as infrastructure, housing and business investment. Ministers have reiterated their commitment to the fiscal rules, although they have also indicated they will use any flexibility available within them to support growth. Businesses will now be watching closely for signals on investment, productivity and measures designed to strengthen the UK's economic outlook.  

IGD opinion 

UK growth remains significantly weaker than businesses would like, limiting consumer spending and constraining investment across the economy. Any credible measures that support productivity, investment and long-term growth are likely to be welcomed by industry. IGD will provide a full analysis of the Budget and its implications for the food industry following the Chancellor's announcement. 

Hopes of Middle East de-escalation ease oil market concerns 

Oil prices fell sharply this week as renewed hopes of a diplomatic breakthrough in the Middle East reduced concerns about energy supply disruption. Scott Bessent, US Treasury Secretary, said the US was in talks with Iran and that there was "a chance we may have a deal today or tomorrow" to reopen the Strait of Hormuz and move towards "a more normalised position in this conflict". Following the comments, Brent crude fell by more than 5% to around $79 per barrel. Markets will continue to watch developments closely, as lower energy prices could help ease inflationary pressures across global food and consumer goods supply chains.

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