Bulletin: Food system risks grow

Increasing risks to food system

IGD’s latest Viewpoint report Inflation persists as risks grow highlights increased risks for the food system including:

• Persistent food inflation

• Geopolitical turbulence

• Low economic growth

• Tightened consumer budgets

• Labour shortages

The report explores the economic landscape, consumer sentiment and policy shifts shaping 2026, examining the implications of geopolitical instability and reflecting on the critical Christmas trading period.

Download the latest Viewpoint report.

Addressing labour shortages

The government is expanding the WorkWell programme with £259m to support people with long‑term conditions to stay in or return to work.

With 3.0m people inactive due to illness—far more than the 1.8m unemployed—the scheme aims to tap into a significant labour pool and boost economic performance.

See our latest article - Future workforce: Workwell programme expanded

IGD opinion

Expanding WorkWell is a positive step for employers and government. But success will depend on employers being ready to engage – especially in sectors like food and drink facing persistent skills shortages. The programme can help widen recruitment pipelines, yet deeper challenges around job quality, pay and working conditions still need to be addressed for long‑term impact.

IGD will work with industry in 2026 on future workforce planning to attract more talent to the food sector through collective action programmes.

Nutrient Profiling Model

The UK Government has published the final Nutrient Profiling Model 2018 (NPM), updating the system used to classify foods and drinks as high in fat, salt or sugar (HFSS). The model becomes stricter, reflecting newer dietary guidance, particularly on free sugars and fibre, and is intended to replace the 2004/05 version.

Crucially, the new model is not yet applied to policy, but a public consultation later this year could lead to updated restrictions on advertising and promotions. With a reduction of 8 percentage points of foods and drinks passing, thousands more products could potentially be classified as HFSS under the new criteria.

See our latest article - Government publishes final UK Nutrient Profiling Model 2018

Business rate cut

The government has announced a 15% cut to new business rates bills for pubs and music venues from April 2026, alongside a two year real terms rate freeze. A typical pub is expected to save around £1,700 in 2026-27. A review of how rateable values are assessed for pubs and hotels will also take place. This applies to England only, although devolved governments will receive funding should they choose to mirror the change. See here for business rate information for Wales and Scotland.

IGD opinion

The rate cut offers welcome but limited relief for parts of the pub sector — yet it is unlikely to shift the fundamentals. Rising employment costs, higher energy bills, changing consumer behaviour and the end of broader rate relief all continue to exert pressure. For pubs already at risk, this measure alone is unlikely to prevent closure.

The scope of the concession is also narrow. It applies primarily to “wet‑led” pubs — those allowing customers to buy a drink without a meal. Restaurants, hotels, and food shops are excluded, meaning that many hospitality businesses facing similar cost pressures will not benefit.

From a wider market perspective, the relief does little to address the structural challenges shaping the sector. Operators continue to face financial pressures, supply chain complexities, and evolving consumer expectations. For further insight see UK Trends 2026: the away from home perspective.

Inflation changes

From February 2026, the method used by ONS to measure retail inflation in food & drink and alcohol & tobacco will change. Rather than depending entirely on field research to gather prices, the new method will use a different data set, comprising 50% field research and 50% store scanning data.

This is intended to give more comprehensive and accurate inflation data – in particular, it will allow for “loyalty card” pricing to be accounted for, for the first time. A new analysis by ONS suggests that, in most months, this will deliver food and drink inflation data that is lower than the previous method.

In the CPI methodology favoured by IGD, food and drink retail inflation is likely to be about 0.3% (30bp) lower under the new method, which is roughly in-line with previous estimates.

Back data will not be updated when the change is made, so users should expect to see a small “step down” in food and drink inflation when February data is published in March 2026.

There will be small impacts on headline CPI, CPIH and RPI inflation measures, but likely too small to show up in most analyses, because food and drink is only a small contributor to overall inflation.