Bulletin: Rate cuts, industry impact
07 August 2025Featuring interest rates, Viewpoint report, food inflation forecasts, borrowing, taxes, living standards and global plastic treaty.
Interest rate cuts – good for the food industry?
The Bank of England’s Monetary Policy Committee (MPC) has reduced the Official Bank Rate from 4.25% to 4.00%. This marks the fifth rate cut since August 2024, as policy makers attempt to revive a faltering labour market and cool economic stagnation while keeping inflation in check.
See our latest article, Interest rate cuts: Food industry impact.
IGD opinion
The Bank of England’s rate cut offers short-term relief but not stability. Inflation remains high, growth weak, and uncertainty persists. Food businesses must invest in automation, innovation, and strategy to build resilience and stay competitive.
Deficit and tax warning
The National Institute of Economic and Social Research (NIESR) has warned that the Chancellor faces a projected £41.2bn deficit by 2029–30, driven by sluggish growth and policy reversals. NIESR states that to meet fiscal rules, the government will likely need to raise taxes, cut public spending, or reform fiscal frameworks.
For insight into how this economic pressure could affect food prices, read IGD’s latest Viewpoint report: Food inflation forecasts 2025-27.
IGD opinion
Taxation is expected to become the main source of financial pressure on households as inflation eases. Potential tax increases could include income tax, national insurance, VAT, and duties on alcohol and tobacco. If Budget 2025 directly impacts households, a further downturn in confidence and spending is expected.
Higher inflation outlook in 2025
The MPC now expects CPI inflation to rise to 4.0% in September, with food price inflation reaching 5.5% by year-end, driven by global commodity prices, labour costs, and Extended Producer Responsibility regulations.
“Bank staff expect food price inflation to fall back gradually next year as pressures from labour cost increases fade and global wholesale food price inflation returns to historical averages. This is broadly in line with intelligence from the Banks’ Agents, who report that most contacts expect food inflation to approach 5%–5.5% in the second half of the year before falling back to around 2%–3% in 2026.”
— Monetary Policy Report, August 2025
This is line with IGD Food inflation forecasts.
Living standards gap widens
The poorest 10% of UK households saw living standards fall by 1.3% in 2024–25, now 10% below pre-Covid levels. While middle- and high-income groups may see modest gains in 2025–26, the poorest are set to decline further as rising housing and food costs outpace income growth.
Global plastic treaty talks
Negotiations are intensifying in Geneva as the United Nations’ Intergovernmental Negotiating Committee works to finalise a legally binding treaty to tackle plastic pollution across its full lifecycle.
With over 180 countries and 600+ organisations involved, the treaty could reshape packaging, waste systems, and sustainability standards worldwide.
The UK government has signalled strong support, co-hosting a business roundtable with the Ellen MacArthur Foundation and publishing a joint statement urging industry alignment.
Download the Net Zero Transition Plan for the UK food system to review evidence-based proposals for how industry and government can achieve ambitious net zero targets by 2030 and 2050.