Food inflation easing - what now?

What’s happening? 

New inflation data from ONS shows that overall inflation (CPI) remained static at 3.8% year-on-year in September 2025. That’s still high compared to the long-term average of 2.5%. for the 21^st Century. 

Food inflation is lower, as IGD predicted 

Food and drink inflation fell to 4.5%, a sharp step-down from 5.1% in August. This is in-line with IGD forecasts issued in the summer, which showed a peak in early Autumn, then a drop, although it may be premature to call it the beginning of a new downward trend. 

Some prices are still rising fast 

Not all categories are easing. Prices for beef, butter, chocolate, processed food and coffee for example – are still seeing strong year-on-year price increases. 

Why? 

These are driven mainly by production issues – poor harvests of cocoa and coffee in key exporting nations and limited supply of beef cattle in the UK.  

Also, a slow-down in inflation does not imply a reduction in food prices. In fact, IGD does not anticipate a broad reduction in food prices at any time in the foreseeable future.  

Consumers still feel the squeeze 

Food prices are rising faster than other essentials. For many households, they’re rising faster than income. This continues to impact: 

• Shopper confidence 

• Spending behaviour 

• Ability to eat well — or at all 

So yes, the news is “less bad”. But it’s not “good”. 

Business margins remain tight 

High prices do not equate to high profits for businesses. In fact, high prices depress volume demand and tend to limit margins, as businesses try to hold back cost increases. 

UK food factory margins have been under pressure since early 2026. The pressure increased significantly following the Russian invasion of Ukraine and this has been sustained since then. 

UK farm margins have improved a little in the last year, but input prices for farmers are still extremely high by historical standards. 

So, what now? 

Tempting as it is to relax, we must not repeat the mistakes of 2007–09. No real lessons were learned in the aftermath and no major reforms were made – leaving the industry vulnerable to new pressures and meaning that shoppers were exposed. 

This lesson must be learned. Falling inflation must be seen as an opportunity to harden the supply chain against possible future spikes and not as a excuse to slip back to “business as usual”. 

If businesses are to protect consumers from food inflation in the long term, there are two broad tasks to be achieved.  

1. Build resilience to shocks - The sources of shocks are well understood and are listed in IGD’s recent report, Building a resilient food system. Climate risk and the possible financial impact on UK food and rink are explored in detail in IGD’s dedicated report - A climate risk assessment of the UK food system. 

2. Boost local production - Especially for the lean protein and fresh produce that form part of a healthy diet.  

Expanded local production would provide economic growth, manage inflation and also allow “re-shoring” of a lot of food production.  There are some policy challenges to overcome in expanding UK poultry and horticulture production. IGD’s Viewpoint Special report, Driving growth through a thriving food system, unpicks these challenges and suggests policy changes which might unlock the growth potential of UK agriculture.