Food inflation: 2025 vs 2026 outlook
22 January 2026Food inflation is cooling gradually, but risks remain, businesses shouldn’t assume the pressure has passed.
2025 inflation: The full picture
The latest ONS data gives us a complete picture of 2025 inflation — and the headline insight is clear: inflation ended the year higher than in 2024, despite easing pressures elsewhere in the economy.
All items inflation reached 3.4% year-on year, as measured by the CPI method, up from 2.5% in 2024, aligning with OBR expectations.
Wages are still rising ahead of inflation, meaning real terms improvement for at least some workers, but the gap narrowed steadily through the year, signalling that those gains are slowing.
Food and drink showed even stronger inflationary pressure. Retail food inflation averaged 4.2% in 2025, up sharply from 2.7% in 2024, matching IGD forecasts. In contrast, inflation in food and drink eaten away-from-home (AFH), eased to 4.1%, down from 5.1% in 2024.
What’s the inflation outlook for 2026
Inflation is set to ease only gradually in 2026, keeping pressure on households and limiting room for policy manoeuvre.
The OBR expects all items inflation to slow through 2026, not reaching the 2.0% target until 2027. This gentler path may create scope for further base rate cuts, but the Bank of England has shown great caution in this respect, and any cuts will be moderate at best.
Retail food and drink inflation is forecast to follow a similarly gradual downward trend. IGD expects 3.3–4.3% in 2026 (mid‑case 3.8%) and 2.8–3.8% in 2027 (mid‑case 3.3%).
However, the food system is extremely vulnerable to shocks - from adverse weather to supply disruptions — meaning even small disturbances could easily knock these forecasts off course.
IGD opinion
Food inflation remains stubbornly high, highlighting continued pressure across the global food supply chain. This stickiness reflects structural constraints that cannot be solved by simply increasing output.
A long‑term solution requires expanding capacity in the right way, producing food that is nutritious, sustainably grown and ethically sourced. Growth must be paired with evolution: not just more food, but better food, produced through resilient and sustainable systems.
Increasing UK production of fruit, vegetables and lean protein offers a practical starting point, with strong potential if supported by the right policy environment.
IGD’s Viewpoint Special report sets out clear actions to accelerate growth in horticulture and poultry, and is available to download for free.