Bulletin: The peak of food inflation?

The peak of food inflation?

The latest ONS inflation data shows that food price inflation rose from 4.9% in July to 5.1% in August 2025. This is in line with IGD forecasts.

Inflation from beef, milk, cheese, eggs, fruit, and vegetables continues to place pressure on food shoppers.

Inflation for food and drink Away From Home rose from 4.1% in July to 4.2% in August.

So, is this the peak?

See our latest article – Is food inflation peaking?

IGD opinion

This is probably the peak. IGD forecasts that peak food inflation will probably peak in late summer 2025, easing into 2026. However, risks like hot, dry weather and policy changes, including EPR and the National Living Wage could still impact prices.

Building a more resilient food system is crucial for stabilising prices

Building a better food system

Developing a more resilient and future-fit food and drink system is the only thing that can really protect supplies and stabilise pricing for food shoppers.

IGD’s event The Future of the UK Food System, in 2026, will bring together leaders from across the supply chain to consider how the system can be made more resilient, sustainable and productive.

Register your interest for 2026.

Interest rates and growth

The Bank of England Monetary Policy Committee has voted by 7-2 to keep interest rates at 4%. Despite CPI inflation of 3.8% in August, the Bank expects it to reach the 2% target “in the medium term.” The Bank notes that “Underlying UK GDP growth has remained subdued, consistent with a continued, gradual loosening in the labour market, as well as a margin of slack in the economy.”

Watch out for new Viewpoint special report

Our new Viewpoint special report - Driving growth through a thriving food system – due out 25 September explores how targeted opportunities in the food system could boost economic growth while also improving our health, protecting the environment, and making us more resilient. It offers clear, well-researched insights into the current economic landscape to help shape the government’s growth plans.

UK labour market still weakening

New labour market data from ONS shows that demand for labour in the UK is still weakening. The number of payrolled employees has been declining slowly, but consistently since the end of 2024. The number of unfilled job vacancies is also declining slowly.

Pay still outpaces inflation - just. Average weekly earnings hit £725 in May - July 2025, up 4.8% year-on-year. But the gap between pay growth and price rises is narrowing, signalling a potential turning point for household spending power.

IGD opinion

Rising pay is generally a positive social force, especially when it benefits the least well-off workers. However, it can also fuel inflation, especially in labour intensive activities such as retail and Away From Home.

This data has implications not just for workers but for pensioners too. Under the triple lock rule, the state pension next year will rise in line with whichever is highest: earnings growth, inflation, or 2.5% (based on May to July figures).

At time of writing, no official statement has yet been made, but if earnings lead the increase, the basic state pension would rise from £176.45 to £184.75 per week from April 2026. This above-inflation uplift would add further strain to government finances.

UK border operations

The Committee on Environment, Food & Rural Affairs (EFRA) has issued a new report on the operation of UK borders, in the post-EU period. The report identifies significant weaknesses in the new UK border regime, especially on the Short Straits route: “inconsistent enforcement, flawed digital systems, inadequate consultation and limited support for local authorities.”

EFRA specifies that these failures represent a major threat to the UK food system and notes that potentially diseased foods have already been allowed to enter the UK due to system weakness.

IGD opinion

The new Border Target Operating Model (BTOM) was intended to provide technically advanced, “light touch” border controls, with physical inspections driven by intelligence. It seems that this vision has not yet been achieved.

EFRA states that development of a new sanitary / phyto-sanitary (SPS) agreement with the EU might help to address the problems it has identified. This would certainly be helpful for food and drink businesses, eliminating at least some border procedures for trade in both directions.

However, such deals tend to take a long time to agree, even when the two sides are closely aligned, so this is unlikely to be a quick fix.