Including resilience, Future of the UK Food system, El Niño, petrol, diesel, public debt, household incomes, shopper confidence, smoking, net zero, and energy.
UK food system enters new era of risk
Industry leaders believe the UK food system is entering a new era of heightened risk, with climate change, geopolitical disruption and economic volatility creating growing challenges for long-term food supply. At IGD Future of the UK Food System 2026, experts from across industry and government will discuss the actions needed to strengthen resilience and safeguard future growth.
Record El Niño raises food inflation risks
The current El Niño event could disrupt global food production and add to UK food inflation. New World Meteorological Organization forecasts suggest it will peak in December 2026 and persist until at least February 2027. Combining real-time data and multiple independent forecasts, the WMO expects temperatures in the key eastern Pacific region to reach as much as 3.7°C above average in December. A strong event could bring severe weather impacts worldwide, with drought, flooding and crop disruption affecting key sourcing regions.
Read IGD’s latest food inflation forecasts to understand why El Niño is expected to be a major contributor to UK food inflation in 2027 and 2028.
IGD opinion
El Niño could become an important source of food price pressure in 2027, particularly for products sourced from climate-sensitive regions. The scale and timing remain uncertain, but businesses should review exposure across sourcing, availability and commodity costs.
Rising diesel prices add pressure on households and food businesses
Diesel prices have moved close to record highs, with recent data showing UK averages around 199p per litre.
Higher fuel costs hit household incomes directly through motoring costs, reducing disposable income while shoppers remain highly price sensitive. For food businesses, diesel is a key cost in distribution, logistics and store operations, while oil and gas volatility can feed into packaging, manufacturing, and energy bills. If sustained, higher energy and transport costs could add pressure to margins and slow the recovery in consumer spending power.
IGD opinion
Rising diesel prices are a reminder that food inflation risks remain exposed to energy and transport costs. Even where commodity and wage pressures ease, higher fuel costs can quickly feed through supply chains, particularly for distribution-heavy categories and temperature-controlled logistics.
For shoppers, the impact is twofold: higher motoring costs reduce disposable income, while additional business costs may limit the pace at which food price pressures ease. This reinforces the need for businesses to keep a close watch on energy volatility, strengthen logistics resilience and continue focusing on value as confidence remains fragile.
High bond yields tighten fiscal choices ahead of Budget
High public debt and elevated long-term borrowing costs are adding pressure ahead of the Budget, with 30-year gilt yields remaining high by recent standards. Higher debt interest costs reduce the government’s room for manoeuvre, increasing the risk of tax rises, spending restraint, or delayed support for business investment.
IGD opinion
For food businesses, the impact is indirect but important. Tighter fiscal choices could weaken household spending power and add to pressure on margins if policy raises business costs. The priority for government should be measures that support productivity, investment, and resilience, rather than adding further cost to the food system.
New incomes data shows short-term gain, long-term pain
New ONS data shows household disposable incomes recovered in 2024-25, with mean income up 3.6% in real terms after inflation and median income up 3.5%. The rise reflects easing inflation and continued wage growth, helping spending power recover after the cost-of-living squeeze.
Separate Resolution Foundation analysis shows why this recovery may feel limited for many households. It estimates that five years of unusually high inflation have left typical working-age households £2,900 worse off this year than if inflation had remained at 2%, with energy and food central to the squeeze.
However, much of the improvement simply regains ground lost during the sharp rise in living costs between 2021 and 2023. Gains were strongest at the bottom and top of the income distribution, while middle-income households saw more modest increases.
IGD opinion
Rising incomes are welcome and will provide some support for consumer spending. However, spending power has improved in the latest year rather than fully recovered from the cumulative income shock of the past five years. This continues to shape shopper behaviour, reinforcing value-seeking, caution around discretionary spend and pressure on policymakers ahead of the Budget.
Income growth slowed sharply following the 2007-08 financial crisis and has never returned to its previous trajectory. As a result, many households are only modestly better off than they were before the Credit Crunch, despite almost twenty years having passed.
This reflects deep-seated structural weaknesses in the UK economy, including weak productivity growth and low levels of investment. The result has been a prolonged squeeze on consumer spending power, helping to drive demand for value-led retailers and limiting growth opportunities for shopper-facing businesses.
Looking ahead, government policy will continue to play an important role in shaping household finances. The government will be reluctant to either raise personal taxes or reduce benefit payments, but difficult fiscal choices remain. Decisions in these areas could have a significant impact on disposable incomes and consumer confidence over the coming years.
Shopper confidence falls as food price concerns grow
IGD’s September shopper headlines report show cost-of-living pressures weighing on shoppers ahead of the Autumn Budget.
Shopper confidence fell three points to -3, reversing August’s neutral position.
29% expect food prices to become much more expensive over the next year, up from 21% in August.
Trust in the food industry to keep prices low fell to 42%, from 49% in August.
Financial confidence weakened, with more shoppers expecting to be worse off over the coming year. Concerns about possible tax rises are adding to uncertainty, particularly for lower-income households.
Build net zero confidence across your business
As food businesses face growing pressure to turn net zero plans into practical action, IGD has launched a free Introduction to Net Zero online course. Designed for colleagues at all levels, the three-hour, self-paced course covers sustainability, business resilience, agricultural transition, and changing consumer demand. Complete it between 3 November and 1 December, with further intakes planned for 2027. Register now or contact [email protected].
Smoking falls below one in ten adults
New ONS data shows smoking prevalence continued to decline in 2025, with 9.8% of UK adults smoking cigarettes, down from 10.6% in 2024 and 20.2% in 2011. E-cigarette use remains slightly higher than smoking, with 9.9% of adults in Great Britain using an e-cigarette daily or occasionally.
IGD opinion
The long-term decline in smoking is another example of how health, regulation and generational change are reshaping consumer behaviour. For food and grocery businesses, it reinforces the wider shift towards health-conscious choices, changing convenience missions and evolving category demand. The rise of vaping also shows how quickly substitute products can reshape established markets.
Changing preferences around tobacco also mean a change in the economics of operating small grocery stores. In the convenience channel especially, many stores historically relied on footfall and profits generated by tobacco sales. With smoking in decline, ranges have shifted, with food and drink becoming more important.
North Sea energy unions threaten strike action
Pay talks between trade unions and energy company Apache appear to have broken down. Unite, representing the workers, states that they have voted to back strike action.
The union says that, if put into effect, strike action would include around 160 offshore workers in the North Sea energy sector, with risk that UK production of oil and gas will be disrupted. Apache have offered reassurance that supply disruption will be minimised.