British shoppers could face renewed pressure next year as food prices could increase by up to 4.9% according to the Institute of Grocery Distribution (IGD).
The IGD made the prediction on Thursday, citing higher costs for businesses caused by measures in the Labour government’s budget.
The prominent grocery researcher forecast food inflation for 2025 in a range of 2.4% to 4.9%.
UK food price inflation reached its highest since 1977 in March 2023 at over 19%.
It has since slowed and was 1.9% in October of this year, official data said.
While energy and commodity prices will be a little higher in 2025, the IGD said, there will be significantly higher employment and regulatory costs for food businesses.
They will face higher employment costs from April due to increases in National Insurance contributions and the minimum wage announced in the new Labour government’s October budget.
Corporate Britain has heavily criticised the budget, warning that it will be inflationary.
Former Asda executive chairman Stuart Rose made his criticisms known to LBC Radio last month, saying, “I don’t think the government understands business, is the real truth.”
Rising Costs
Next July, food businesses will also face higher import costs, mainly caused by the delayed final phase of post-Brexit border changes kicking in that will see more checks of fruit and vegetables entering the UK from the European Union.
Higher packaging costs will follow in October due to regulatory charges.
The IGD said the food sector would only be able to absorb between 20% and 40% of these costs, meaning consumers will have to contend with the remainder.
James Waldon, chief economist at IGD, said, “The rising cost of living, combined with increased employment and regulatory costs, will keep inflation elevated.
“Consumers will undoubtedly look for ways to save money, but the impact of these cost pressures will be felt across the economy.”
The Bank of England said last month that it expected annual food price inflation to average 1.1% across the following six months.
Its forecast for overall average inflation for 2025 is 2.75%.
Read More: UK Grocery Inflation Rises to 2.6% – Kantar
