Workforce pressures impact food inflation and resilience

With the ONS reporting food inflation rising to 3.7%, up from 3.3% last month, it’s a reminder that domestic cost drivers are still shaping the outlook. The latest labour market data reinforces why: easing vacancies haven’t removed the wage, staffing and productivity pressures that shape operating costs, and the sector’s capacity to absorb shocks. 

What the latest ONS labour market data is telling us 

Recent labour market trends help explain why workforce pressures remain a structural issue for food inflation and resilience: 

• Vacancies continue to ease: the early estimate for January to March 2026 was 711,000, down 29,000 (3.9%) on the previous quarter. 

• Wage pressure is easing but still relevant for costs: average weekly earnings growth was 3.6% for regular pay in December 2025 to February 2026. 

• Overall unemployment was 4.9% in December 2025 to February 2026, down from 5.2% in November 2025 to January 2026. 

• But pressures are not uniform: the unemployment rate for 18- to 24-year-olds increased from 13.7% to 14.3% over the same comparison.  

How labour shortages translate into higher operating costs 

When essential roles are hard to fill, whether in manufacturing, logistics, retail operations or hospitality, employers typically respond in ways that lift costs quickly: higher starting wages, retention bonuses, faster progression, and broader benefits to reduce churn. Together, these cost pressures mean labour is no longer a short‑term operational issue, but a factor shaping the timing, persistence and volatility of food inflation. 

But the wage line is only part of the story. Labour shortages often bring hidden operating costs too, such as heavier overtime, greater reliance on agency labour, higher recruitment spend, longer onboarding and training cycles, and productivity loss from running with gaps on shifts. In food and drink, where service levels, safety requirements and tight delivery windows matter, these costs can be especially hard to avoid. 

Why workforce costs are often “sticky”, not temporary 

Unlike some input costs that can fall back quickly (for example, spot energy prices), labour pressures tend to accumulate. Once pay rates rise, they rarely reset; businesses must protect internal pay structures, maintain morale and remain competitive in local labour markets.  

At the same time, the underlying drivers of tight supply, ageing demographics, long‑term health-related inactivity, skills mismatches and ongoing constraints on labour mobility, do not disappear with a single weak quarter in vacancies. The result is that wage and staffing pressures can linger even when the wider economy slows, making them a more persistent source of cost inflation. 

Workforce strain is also a resilience issue 

Resilience isn’t only about inventory, sourcing and transport routes, it’s also about having enough people, with the right skills, in the right places to keep the system running when conditions change. A stretched workforce reduces buffer capacity: fewer trained colleagues to cover absence, less flexibility to add shifts, and less time for preventative maintenance, compliance tasks and continuous improvement. Over time, that can raise the likelihood that small shocks (weather disruption, supplier failures, demand spikes) turn into service issues, delays and waste. 

This aligns with IGD’s Building a resilient food system report, which highlights that resilience depends not just on infrastructure and sourcing, but on having the capacity and capability across the system to respond and adapt when shocks occur. Workforce pressures directly weaken that capability. 

There is also a direct link to productivity. Labour scarcity can accelerate investment in automation and new ways of working, but only if businesses can recruit and develop the technical, engineering and digital skills required to implement and operate that technology. Where skills are missing, firms can end up paying more for the same (or lower) output. That matters because productivity is the key driver of unit costs, and unit costs shape pricing decisions across the supply chain. 

Why this matters for food inflation forecasts 

Food inflation is shaped by a wide set of forces, global commodities, energy, exchange rates and policy, but labour should be treated as a core part of the domestic inflation story. Workforce pressures lift the cost base across manufacturing, logistics and store operations, and those costs do not move in sync with commodity markets. In categories and channels where margins are already tight, persistent labour cost growth increases the likelihood of price pass‑through over time, even if businesses attempt to absorb costs in the short run. 

Workforce constraints also influence food inflation through resilience. If staffing gaps reduce throughput, slow distribution, or erode service levels, the system becomes less able to absorb shocks—raising the risk of short‑term availability issues and cost volatility. In IGD’s recently reissued food inflation forecasts, which reflect the changing geopolitical backdrop following the Middle East ceasefire, labour market pressures remain a key domestic risk. Even where energy and commodity pressures may ease, persistent workforce constraints can lengthen the period over which cost pressures feed through, shaping both the timing and durability of food inflation. 

Workforce pressures in an uncertain economy 

The latest labour market data highlights the challenge facing food and drink leaders: demand may soften, but labour pressures can remain embedded. In a low-growth environment, businesses have less room to absorb wage and staffing costs, yet resilience requirements do not go away. Add in geopolitical volatility, ongoing policy and regulatory change, and uneven consumer demand, and the workforce becomes a central part of managing both inflation risk and operational risk. The practical implication is the need to plan using scenarios: what happens to costs and service if recruitment remains hard even as the economy cools? 

What industry needs to do next 

Addressing workforce pressures is not just about filling vacancies in the short term. It requires a more coordinated, long‑term approach to strengthening workforce capacity, skills and progression across the food and drink system, so businesses can support resilience, productivity and cost control over time. 

IGD’s Food and drink workforce – a quiet crisis building? report sets out why these pressures are structural, and why they are likely to become more visible for consumers if left unaddressed. It brings together labour market evidence with practical implications across the system, from frontline operations to critical skills. 

The report highlights: 

• Where workforce shortages are most concentrated across the food and drink system, and why 

• How labour supply constraints, skills gaps and rising employment costs affect productivity and resilience 

• Why young adults are central to stabilising the pipeline into entry‑level roles 

• What businesses and government can do now to strengthen workforce capacity and reduce longer‑term inflation risk 

Together, these insights can help businesses inform workforce, cost and resilience planning for the year ahead, supporting a more resilient food system in an increasingly uncertain economic environment.