Is food inflation peaking?

Food retail price inflation still rising

The ONS has issued new inflation data for August 2025, showing food and drink prices still climbing, up from 4.9% in July to 5.1% in August.

This movement is exactly in-line with IGD’s most recent food inflation forecast, issued in the Viewpoint report for July 2025.

Food inflation is uneven. Prices are falling in some categories, like olive oil, sugar, and frozen fish, but rising elsewhere, especially for beef and lamb.

Beef prices are up around 25% year-on-year, driven in part by structural challenges in the supply chain, including long maturation times and high feed costs.

Note, however, that the ONS method for measuring food inflation has limitations. It does not record changes in shopper behaviour or retail offers, nor does it record the benefit of loyalty pricing.

In practice, the prices paid by shoppers may be somewhat below those recorded by the ONS - IGD estimates that true food inflation is 40-45bp lower than the CPI reading.

Planned changes to the ONS method, expected to take effect in spring 2026 should help to fill this gap.

So, is this the peak?

The short answer is probably. Food price inflation has now been heading upwards since late summer 2024, suggesting that the peak value is probably near.

IGD forecasts show the high point will hit in late summer 2025, with inflation easing into 2026. This follows a familiar pattern: food inflation tends to rise in waves, driven by short-term shocks that fade from annual comparisons after 12 months, unless new pressures emerge.

But risks remain. Hot, dry weather could dent yields and push prices higher, especially for livestock products like beef and lamb, where fodder shortages are already biting. This shortage is likely to persist until next year, when spring grass (hopefully) begins to emerge.

Policy changes may also add cost, including the rollout of EPR from October and National Living Wage adjustments in April.

For now, wheat prices remain moderate, likely helped by overseas supply, but the outlook depends on how these risks play out.

The ratchet

Whatever happens to inflation, the prospects of a broad reduction in UK food prices seems remote.

Retail prices in this market tend to move only upward, in a “ratchet” effect, although they often rise behind all items inflation, making food cheaper, relatively speaking.

Building a better food system

The environment for producing food and drink is becoming riskier. IGD identifies ten key threats to UK food system resilience, with climate change and geo-politics being the most powerful.

As the situation develops, businesses must adapt to protect themselves and their consumers. IGD continues to work with stakeholders to support this process.

Hopefully, these issues can be managed - but hoping for the best in an increasing unstable strategic environment is not a strategy.

Developing a more resilient and future-fit food and drink system is the only thing that can really protect supplies and stabilise pricing for food shoppers.

IGD’s latest Viewpoint Special report explores how unlocking targeted food system opportunities in two identified sectors can drive economic growth while improving health, sustainability, and resilience – potentially delivering multiple benefits.

Register your interest for IGD’s event The Future of the UK Food System in 2026.