Bulletin: Tariffs, resilience and disruption

Tariff threat and resilience

President Trump has shifted his stance on the Greenland and Arctic negotiations after what he called a “very productive meeting” with NATO Secretary General Mark Rutte. As a result, tariffs on goods from the UK and select European countries, previously due on 01 February, will no longer be imposed, easing earlier threats of increases from 10% to 25% later in the year. 

See our latest article, Tariffs, resilience and supply chain risks.

IGD opinion

The immediate tariff threat may have lifted, but businesses must be ready for its return. Tariffs remain a favoured tactic for President Trump, now paired with the uncertainty of a potential Greenland deal. If talks fail, tariffs could swiftly re‑emerge. The greatest direct impact on UK food and drink would fall on the spirits sector and, likely on Scotland, in particular.

Broader risks lie in potential restrictions on vital non‑food imports like electronics and biotech, which underpin innovation across the supply chain. A breakdown in global order would amplify pressures through higher input and energy costs. UK food businesses cannot control geopolitical shifts, but building resilience is essential. Forensic understanding of vulnerabilities and pragmatic decision‑making will strengthen stability and foresight across exposed supply chains.

Food inflation proving persistent

Food inflation for December increased to 4.5%, up from 4.2% in November, year on year by the CPI method, bringing the average to 4.2% for 2025. This was in-line with IGD forecasts for the year.

See our latest article, Food inflation 2025 vs 2026 outlook.

IGD opinion

Looking ahead, our latest forecast for retail food and drink inflation is for it to average 3.8% in 2026 and 3.3% in 2027, meaning that food inflation will persist for some time. This is because the food and drink industry is under significant supply chain pressure due to global supply shortfalls and difficult operating environment.

Long-term, the real “fix” for food inflation is to maximise production, especially here in the UK, bringing supply into closer line with demand. There is an opportunity to drive production growth through policy unlocks which we set out in our report: Driving growth through a thriving food system, which outlines how targeted investment in UK horticulture and poultry could boost annual domestic production by £1.3bn by 2030 and unlock over £5 billion of investment into the economy by 2030. 

HFSS back in focus

The Government’s Impact statement on the 10 Year Health Plan for England included public consultations in the first half of 2026 for Tightening advertising and promotion legislation and mandatory reporting and healthy food sales targets.

Read our latest article, HFSS is back in focus.

Pressure on pay

Real pay is still rising, but only just. New ONS data shows average weekly pay, including bonuses, grew 4.7% in the three months to November, edging above 3.5% inflation. However, the gap is narrowing.

The number of people in employment fell slightly year‑on‑year and month‑on‑month, while unemployment held at 5.1% and vacancies ticked up marginally.

IGD opinion

For consumer‑facing businesses, the labour market remains fragile and offers only limited support to demand. Average pay remains a key indicator. With the gap between wage growth and inflation narrowing, it’s clearer why shopper confidence is still subdued, as reflected in IGD’s Shopper Confidence Index.

UK growth underperforming peers

The IMF’s latest outlook shows the UK economy holding steady but still underperforming peers. Growth projections for 2026 remain at 1.3% and 1.5% for 2027, unchanged from previous forecasts, while the 2025 forecast has been nudged up to 1.4% from 1.3%. The IMF forecasts for growth are in line with OBR forecasts. 

UK inflation is now expected to return to the 2% target by late 2026, helped by a cooling labour market. The IMF notes the UK is benefiting from technology‑driven investment, though at a slower pace than the US. Risks remain tilted to the downside, including geopolitical tensions, trade disruptions and uncertainty around AI‑driven productivity.

UK risks in a fragmenting World

The World Economic Forum’s 2026 Global Risks Report highlights a world entering an “age of competition”, with geoeconomic confrontation the top short‑term global risk.

Rising protectionism, weakening multilateralism and volatile geopolitical conditions threaten UK supply chains, trade flows and investment stability. Technology‑related risks, such as misinformation and cyber insecurity, are accelerating, posing challenges for UK institutions and businesses.

Environmental risks, including extreme weather and biodiversity loss, remain the most severe long‑term threats, with growing disruption to food systems and infrastructure likely to affect UK resilience. Overall, the report suggests UK policymakers must navigate heightened economic fragility, reinforce cooperation mechanisms and strengthen national preparedness for interconnected shocks.

IGD opinion

Download our resilience report: Building a resilient food system to understand:

• key risks impacting the food system

• why climate change and geopolitics pose the gravest threats

• how the nature of risk has evolved over the past year

• examples of businesses and governments prioritising resilience

Nature security assessment

The UK Government’s new Nature Security Assessment warns that accelerating global biodiversity loss and ecosystem collapse pose direct risks to UK food security, supply chains, health and economic stability. The report identifies six critical ecosystems whose decline could trigger cascading geopolitical and economic shocks. It urges stronger resilience planning, innovation and global partnerships to protect long‑term UK prosperity.

IGD has identified that biodiversity loss as a key concern likely to put the UK food system under greater pressure. See our article Resilience: biodiversity loss.