Expectation to reach above 9% by the end of the year
THE Food and Drink Federation (FDF) has uprated its food inflation forecast and now expects it to reach over 9% by the end of the year.
The new update from the industry firm comes off the back of the ongoing conflict in the Middle East and is based on the assumption that the Straits of Hormuz opens within 2-3 weeks time.
Dr. Liliana Danila, chief economist at The FDF, said: “The current situation is unprecedented and hard to predict, however given the scale and speed of these cost increases, and despite companies’ best efforts not to pass price increases on, it’s clear that food inflation is going to rise in the months ahead.”
The FDF previously forecasted that the rate of food inflation would gradually ease across 2026 and was projected to end the year around 3%. However, due to the closure of the Strait of Hormuz and impact on oil and gas prices, this has now been uprated three-fold to sit at a projected 9.2%.
As an energy intensive industry, the ongoing war is having a massive and immediate impact on production costs for food and drink manufacturers with energy required at every stage of the process to deliver for businesses across the UK.
These pressures are then exacerbated by rising transport costs and ongoing delays across global shipping routes.
Additionally, many firms have seen a loss of sales across the UK. Many firms exported a number of goods from the UK to the Middle East – such as cereals, chocolate, cheese and biscuits – and these shipments to the region have remained paused or cancelled altogether.
Dr. Danila said: “The food and drink sector is already feeling the force of this geopolitical shock. As one of the UK’s energy intensive industries, manufacturers are facing mounting energy bills, rising transport and packaging costs and disruption across key supply chains. These pressures are hitting simultaneously, and are a significant challenge for businesses to absorb.”
