UK Food Inflation to Peak at 5.1% in 2025, Warns IGD

IGD’s latest Viewpoint report, UK Food Inflation Forecasts 2025–2027, warns that retail food inflation is set to peak at 5.1% in late summer 2025, significantly outpacing general inflation.

This rise is expected to place further pressure on both households and businesses, as the UK economy continues to grapple with sluggish growth and persistent price pressures.

Looking ahead to 2027, the report offers cautious optimism, forecasting a gradual decline in food inflation to 1.8% by mid-2027. However, the near-term outlook remains challenging, with inflationary pressures fuelled by a potent mix of regulatory costs, extreme weather events, and global commodity volatility.

Michael Freedman, Head of Economic and Consumer Insight at IGD, comments:
“Amid economic uncertainty, shoppers are cautious with their finances, increasing private label purchases while reducing impulse and indulgence buys. We identified only 29% of consumers plan to cut back on grocery spending, suggesting many have already tightened their budgets and have little room to cut back further.

“Instead, shoppers are more likely to look for savings on discretionary purchases like clothing and eating out, underscoring a clear prioritisation of food shopping over other categories. Businesses should adapt to shifting customer behaviours by offering value, convenience, and memorable experiences to attract customers and drive growth.”

As these patterns emerge, a deeper polarisation is becoming evident among shoppers. One in four (25%) expect their financial situation to worsen in the year ahead, with this figure rising sharply to 41% among lower-income households – a ten-point increase since May 2024. In contrast, only 11% of higher earners now expect to be worse off, a decrease of five points.

While financially secure consumers remain open to treating themselves through premium dine-in experiences and impulse buys, innovation is increasingly being driven by Gen Z, whose curiosity for new cuisines and novel formats is opening up fresh opportunities for businesses to engage and develop new offerings within the food sector.

IGD’s report calls on retailers, manufacturers, and policymakers to stay closely attuned to shifting consumer behaviours, particularly around value, convenience, and experience, as they navigate the road ahead.