Why food prices are unlikely to fall

The outlook for food prices 

Food inflation has eased from the peaks seen in recent years, but the longer-term outlook points to continued upward pressure on prices. 

IGD’s latest forecast indicates that food and drink inflation in 2026 will be 3.3 to 4.3% year-on-year: lower than recent peaks, but still above the long-run average, which is closer to 2.0%. 

For food businesses, the key implication is that many of the forces driving food inflation are structural rather than temporary. Price pressure is therefore unlikely to disappear quickly. 

Why prices still matter to shoppers 

This matters because food prices remain the most powerful factor in regulating shopper financial confidence. 

IGD’s ShopperVista studies show that food prices outweigh motoring costs, utility costs and even housing in shaping confidence. 

The pressure is most acute for younger and less-affluent households, many of which have already made as many cuts in food spending as they can. 

Wider evidence also shows that food insecurity remains a significant issue in the UK: according to the Trussell Trust, 1 in 6 households faced food insecurity in 2025, amounting to 14.1m people. 

This is not unique to the UK. Across Western Europe, food prices have risen rapidly in recent years, as shown by Eurostat. 

These price increases – and the pressure they create for households – have drawn the attention of government, media and NGOs. 

Affordability remains on the policy agenda 

In November 2025, the government created a Food Inflation Gateway to help understand food inflation pressures. In February 2026, it appointed Lord Wilson (the Iceland Chairman) as cost-of-living Tsar. 

The cost of living and flat living standards were also highlighted by Andy Burnham in a speech given this week, suggesting that affordability will remain front-of-mind for policymakers. 

What this means for food businesses 

Higher food prices have drawn attention and concern but, so far, there has been little evidence of excessive profits on the part of food businesses. 

Understanding cost and profit within a system like food and drink is difficult, but IGD’s investigation (the Where does your food pound go? report) showed that margins for nine everyday products were extremely thin across the supply chain – and getting thinner. 

Higher prices appear to be a consequence of higher costs being passed on to shoppers, not higher margins for businesses. 

At the same time, higher prices tend to weigh on volume demand since the more goods cost, the less will be purchased. 

This can be seen in Worldpanel data, which shows that retail food and drink demand has been flat, in real terms, for at least two years. IGD market forecasts suggest that this will continue in the mid- to long-term. 

Lower food prices would benefit shoppers, especially the most vulnerable. They would likely also deliver business benefits in the form of higher volume demand and new opportunities for market development. 

However, a broad and sustained fall in prices looks unlikely. This puts the emphasis on productivity, investment and resilience as the most practical routes to protecting affordability and supporting growth. 

What history tells us about food prices 

History suggests that broad and sustained falls in food prices are unusual , at least in the short- to mid-term. 

Taking a very long-term view, back to the 1950s, food price inflation has been highly variable, swinging from mostly positive to sometimes negative. 

However, the general direction of travel is almost always towards higher nominal prices. It is only possible to identify one recent period with a broad and sustained reduction in food prices. 

This period, covering roughly 2014 to 2016 and highlighted on the chart, may be associated with a specific set of circumstances: 

• A period of strong price increases in the years immediately before (2008–14), driven by temporary cost changes, which gave room to cut prices again as costs receded 

• Emergence of discount grocers as large-scale and widespread operators in the UK, with high quality stores and credible ranges – giving them the power to compete with mainstream supermarkets 

• Supermarkets moving to compete explicitly on price with discount grocers, beginning with Morrisons in around 2014 with its Match & More campaign 

It seems unlikely that this full set of circumstances will be repeated. The supermarket decision to compete with discounters on price was undoubtedly a one-off market moment. 

Understanding today’s inflation pressures 

Turning to the more recent inflation event, running from around 2021–23, the causes are well understood. IGD estimates that, at peak, around one-third of inflation pressure was contributed by government policy. 

Relevant policies include the introduction of EPR, changes to National Insurance (NI) rules and, more recently, business rate changes and implementation of the Employment Rights Act. 

These have added considerably to business costs and have caused concern amongst IGD contacts. However, they are likely to have a significant inflationary impact only once. 

For example, there is little scope for a further expansion of NI liability and, whilst EPR payments may rise further, the biggest inflationary impact was likely to be in Year One. 

So, the inflationary effect of policy change is likely to disappear from annual price comparisons over time, softening inflation – although the business cost of implementing policy is unlikely to actually fall. 

A similar point can be made regarding geopolitics. War in Ukraine created a major shock in global food markets; the impact of conflict in the Persian Gulf has been more limited so far. 

Again, this sort of shock creates a one-off inflationary effect. In this case, there is also the possibility that some effects might reverse when conflict ends and global markets normalise. 

However, the majority of food inflation pressure, about two-thirds, is still believed to be underlying. This reflects the balance between global demand and the availability of key inputs such as food commodities, energy, labour and land, as well as the capacity of global food systems to expand supply in response. 

Looking ahead 

The key message is that food prices are unlikely to fall materially. Food and drink inflation is expected to moderate compared with the peaks of recent years, but the level of prices is likely to remain underpinned by structural cost pressures. 

There are also risks to the forecast, especially from weather. The UN, WMO and other leading climate agencies have now confirmed that El Niño conditions emerged in 2026 and are expected to persist through the remainder of the year. 

This means additional ocean heating, with complex, but generally negative, implications for agriculture worldwide, increasing the risk of weather-related disruption to global food production and prices. 

Alongside the impact of El Niño, global demand for food, energy and other commodities is likely to continue rising fast enough to keep food business costs under pressure for the foreseeable future. 

For all these reasons, IGD anticipates that UK food prices will remain under upward pressure, with little prospect of a broad and consistent reduction for shoppers. 

Any improvement in food affordability is more likely to come from incomes moving ahead of total living costs, rather than a sustained fall in food prices.  

That makes the industry response important.  

The best contribution business leaders can make to stable and affordable prices is to focus on productivity, efficiency and capacity growth. In a world of structurally higher costs, these are likely to be the most important drivers of long-term affordability. 

You can find more of IGD’s thinking on the future of food prices in our latest Viewpoint report, Food Inflation Forecasts 2026–28.