IGD releases new food inflation forecast

IGD (Institute of Grocery Distribution) has released updated food inflation forecasts showing that, while food inflation is no longer expected to peak as high as a severe energy shock scenario, the impact is now expected to last much longer, into 2028. This means households with children would need to find around £203 extra for food and drink this year, as well as another £207 for next year[1],  versus current price levels.

IGD forecasts food inflation to peak at 5.5% in the second half of 2026, averaging 3.7-4.7% across the year. Whilst the energy shock has not played out as the most severe of three scenarios that IGD set out in March at 8%, the impact will continue for longer, which is extending pressure on both food businesses and shoppers.

Despite a peace deal having been announced by the US and Iran, the impact on food inflation is still feeding through with a time lag, meaning geopolitical, energy and supply chain pressures are showing up and overlapping each other. As a result, there will be sustained margin pressure for food businesses and ongoing uncertainty for shoppers.

IGD expects food inflation to remain elevated throughout 2027, averaging 3.2-4.2%, and to stay above target into H1 2028, averaging 2.3-3.3%. This comes on top of a sustained rise in prices that began in 2021, with UK retail food prices at the end of 2027 likely to be up over 40% vs the pre-Covid level, leaving households far more exposed to further price spikes. For shoppers, especially in lower-income households, pressure will continue to intensify, creating a more divided and less predictable environment for food businesses.

For many households, the risk is no longer just rising prices, but a return of cost-of-living anxiety. Consumers are increasingly tightening budgets in anticipation of further pressure rather than waiting for prices to rise and this is reflected in IGD’s Shopper Confidence Index which remained subdued at -2 in May 2026. IGD data shows food prices (94%) and energy bills (86%) are shoppers’ main worries, with food price concerns at their highest level for three years, with more shoppers worried about food prices now than during the height of the cost-of-living challenges (94% in Apr ’26 vs 91% in Jan ’23).

James Walton, Chief Economist at IGD, comments: “The impact of geopolitical conflict usually takes time to filter through to raised food prices and therefore, despite the peace deal announced by the US, we expect food inflation to peak at 5.5% due to the disruption already experienced. Energy, labour and policy costs are continuing to build gradually, with many becoming structural rather than easing quickly, as well as climate risks which can affect supply. This is keeping sustained upward pressure on prices, which is expected to continue into 2028.

“While inflation may not peak as high as the most severe scenario, there is little room for relief as prolonged pressure will continue to weigh on both industry and household budgets, with an extra £203 to find this year for households with children. The businesses that pull ahead in this environment will be the ones building resilience and making sharper choices while uncertainty is still unfolding.”

Despite extreme volatility across energy, commodities and policy, IGD will continue to monitor developments and provide updated forecasts as the situation evolves.

To read more about our inflation forecasts, visit our Viewpoint report here.

 

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Key strengths of IGD food inflation forecasts:

• A strong and proven track record: With analysis dating back for decades and official forecasts published from 2022, IGD’s forecasts have built a strong track record for credibility and accuracy in a volatile market environment, closely tracking outturn food inflation, building confidence with stakeholders.

• Independent and impartial: As a charitable organisation focused on delivering a thriving food system, IGD has no agenda with its forecasts, only a commitment to providing an accurate, balanced view to support decision-making.  

• Grounded in real-world industry insight: As a convenor at the heart of the food industry, IGD draws on confidential perspectives from across the full supply chain to reflect actual trading conditions, without compromising commercial sensitivity.  

• Actionable insight, not just data: We go beyond the numbers, explaining what food inflation forecasts mean in practice for businesses, shoppers, their baskets and everyday decision-making.  

• A comprehensive market outlook: Our inflation forecast is part of a wider suite of forecasts that we report on across retail and away from home. IGD was among the first to publish total market food inflation forecasts, offering a breadth of insight that few others can provide. We also support with unique shopper insight and market knowledge, framing the figures in real-world context. 

Notes to editors:

1.        All content is owned by IGD. If you use or refer to any content in this press release, please credit IGD.

2.       Follow us on LinkedIn: https://www.linkedin.com/company/igd/

3.       IGD brings together stakeholders from across the food system, fostering action across on critical challenges across a broad cross section of forums. Through evidence-based insights, credible research, and thought leadership, IGD guides businesses to make informed decisions that not only benefit their operations but also contribute to the collective good of society.  As a charity with a long-standing commitment to the food and grocery industry, IGD does not advocate for any single commercial interest but works towards fostering alignment on shared goals that can have a positive, lasting impact on both the industry and the communities it serves. Its neutrality and impartiality are key to its role in facilitating collaboration, whether through policy development or addressing emerging risks and opportunities. By staying connected to the changing dynamics of the world, IGD ensures that the food system remains robust and sustainable, creating tangible benefits for businesses, consumers and society.

[1] Family Spending, ONS and IGD estimates for spending on food and non-alcoholic drink, households with children