The Food and Drink Federation (FDF) has cut its forecast for UK food inflation to 3.9% by Christmas 2026, less than half the 9% to 10% it warned of in April after the closure of the Strait of Hormuz sent energy and commodity costs surging. The trade body, which represents around 12,000 food and drink manufacturers, published the revised Food Inflation Forecast on 9 September, according to PA Media and Grocery Gazette. The relief is partial: the same forecast now expects food price growth to keep climbing into next year, peaking at 6.4% in July 2027 and staying above historic averages through the second half of 2027.
The revision lands three days before a busy week for UK price data. The Office for National Statistics publishes consumer price inflation for August on Wednesday 16 September, the Bank of England’s rate decision follows on Thursday 17 September, and official retail sales for August arrive on Friday 18 September. For shoppers, independent grocers and high-street food businesses planning for the festive quarter, the question is no longer whether prices rise, but by how much and for how long.
In short
- Forecast cut: the FDF now expects food and non-alcoholic drink inflation of 3.9% by December 2026, down from the 9% to 10% it projected on 1 April.
- Longer tail: the peak has moved, not vanished: 6.4% in July 2027, with prices staying above historic averages into late 2027.
- Cost drivers: gas prices more than doubled since February, UK diesel up 28.6% since the Middle East conflict began, wheat up 45%, cocoa more than doubled, rice up 60%.
- The basket test: a £100 (about USD 135) grocery shop from January 2020 costs £138.60 today and could reach £147.50 by summer 2027, per the FDF.
- What to watch: ONS CPI for August lands on 16 September; the BRC-NIQ Shop Price Index already showed food inflation rising to 2.8% in August.
What exactly did the FDF change in its forecast?
The FDF’s Food Inflation Forecast is a modelled projection for the food and non-alcoholic drink component of UK consumer price inflation. The September edition puts that figure at 3.9% by December 2026, according to PA Media. In April, following the outbreak of the Middle East conflict and the disruption to shipping through the Strait of Hormuz, the same model produced a projection of 9% to 10% by the end of the year. Before that, the FDF’s September 2025 forecast had pointed to around 3.2%.
Grocery Gazette reports that the downgrade reflects stronger resilience among manufacturers and lower-than-expected energy price pressures in the intervening months. The FDF itself framed the change carefully: the near-term number is lower, but the period of elevated inflation is now expected to last longer. The forecast anticipates inflation continuing to rise through 2027, reaching 6.4% in July 2027 before remaining above historic averages for the rest of that year.
Karen Betts, the FDF’s chief executive, said manufacturers had kept food prices as low as possible during the energy shock since the closure of the Strait of Hormuz but that they could not do so indefinitely. She added that the persistently higher costs of energy, logistics and packaging, compounded by this summer’s extreme heat, meant food prices would rise this year and that the rise was expected to be sustained into 2027, per PA Media.
The three FDF forecasts side by side
| Forecast edition | Headline projection | Main stated drivers |
|---|---|---|
| September 2025 | About 3.2% by end of 2026 | Pre-conflict baseline |
| 1 April 2026 | 9% to 10% by end of 2026 | Strait of Hormuz closure, energy spike, red diesel up 80%, fertiliser supply |
| 9 September 2026 | 3.9% by December 2026; 6.4% peak in July 2027 | Energy, logistics and packaging costs, extreme summer heat, commodity prices |
Sources: FDF press releases of 1 April and 9 September 2026 as reported by Food Manufacture, PA Media and Grocery Gazette.
Why was the April warning so much higher?
The April forecast was published roughly a month after strikes on Iran began on 28 February and the Strait of Hormuz, through which around a fifth of global oil and LNG normally passes, was effectively closed. The FDF’s chief economist, Dr Liliana Danila, said at the time that the food and drink sector was already feeling the force of the geopolitical shock and that the pressures were hitting simultaneously, making them a significant challenge for businesses to absorb, according to Food Manufacture.
The April document listed the transmission channels: higher energy costs at every stage of production, more expensive transport as oil prices rose, shipping delays, lost export sales to the Middle East, and a surge in red diesel costs for farmers of around 80% alongside tighter fertiliser supply. On those inputs, a near-double-digit food inflation rate was a reasonable central case.
What changed is that the worst-case pass-through did not fully materialise in the summer months. Official data for July, published by the ONS on 19 August, showed food and non-alcoholic beverage inflation actually easing to 1.3%, down from 1.7% in June and the smallest contribution from food to the headline rate since October 2021. Manufacturers and retailers absorbed a large share of the cost increases, and the competitive dynamics between the big grocers and the discounters kept shelf prices in check for longer than the April model assumed.
Energy: doubled gas, expensive electricity, volatile diesel
The FDF says gas prices have more than doubled since February, that UK electricity prices are among the highest in Europe, and that UK diesel prices have risen 28.6% since the start of the conflict. Diesel matters twice over for food: it powers the lorries that move goods to depots and stores, and red diesel powers the tractors and machinery on farms.
The ONS July release showed how uneven that energy picture has been. Gas prices paid by households jumped 14.7% following the July adjustment to the Ofgem price cap, while diesel at the pump fell 8.8 pence a litre month on month, against a 2.9 pence rise a year earlier. Ofgem has since announced a further 4% increase in the domestic cap from 1 October, taking the annual bill for a typical dual-fuel household to £1,723 (about USD 2,330) from £1,663, citing continued pressure on oil and gas supplies from the Middle East conflict. Roughly 35% of households, around 11 million, are on fixed tariffs and will not be affected by that rise.
Which commodities are pushing prices up?
Beyond energy, the FDF forecast points to a cluster of agricultural commodities that have moved sharply in the past year. According to PA Media’s account of the forecast, wheat is up 45%, cocoa has more than doubled, rice is up 60%, sugar is up 27% and coffee is up 22%. Grocery Gazette adds that UK-grown produce has risen around 10% over the past year after a summer of extreme heat and drought.
These inputs feed different aisles at different speeds. Wheat moves bread, pasta, biscuits and cereals within a few months. Cocoa, which has been elevated for more than two years, is already visible in confectionery pack sizes and prices ahead of the festive season. Rice and sugar are staples for both household cooking and manufactured products. Coffee affects both the supermarket shelf and every independent cafe on a high street.
How the different food inflation measures compare
Anyone trying to reconcile the headlines will notice that three or four different food inflation figures are in circulation. They measure different things over different windows, which is why they diverge.
| Measure | Latest reading | Period | What it covers |
|---|---|---|---|
| ONS CPI food and non-alcoholic beverages | 1.3% (down from 1.7%) | July 2026, published 19 August | Official annual rate across the whole market; August data due 16 September |
| BRC-NIQ Shop Price Index, food | 2.8% (up from 2.2%) | August 2026, published 1 September | Shelf prices at large retailers; fresh 3.0%, ambient 2.5% |
| Worldpanel like-for-like grocery inflation | 2.1% | Four weeks to 9 August, published 18 August | Take-home grocery prices from a household panel |
| FDF Food Inflation Forecast | 3.9% by December; 6.4% peak July 2027 | Published 9 September | Modelled projection of the CPI food component |
The pattern across the measures is consistent even if the levels are not: food inflation bottomed out in early summer and has begun to turn back up. The BRC-NIQ index recorded a 1.0% rise in food prices between July and August alone, with ambient food jumping from 1.1% to 2.5% year on year, which the BRC attributed to higher costs affecting imported and processed products.
What does the BRC say retailers are facing?
The retail side of the supply chain tells a similar story with a different emphasis. The BRC-NIQ Shop Price Index for August, published on 1 September, showed overall shop price inflation at 1.5%, its highest level since February 2024. Helen Dickinson, the BRC’s chief executive, said shop price inflation had risen to its highest level in more than two years, albeit well below the headline Consumer Price Index, and that the impact of higher energy, input and commodity costs was beginning to filter through into prices.
Dickinson said retailers were facing persistently high operating costs, limiting their ability to absorb further increases without affecting investment, jobs and prices. She added that if the government was serious about supporting growth while keeping the cost of living in check, it had to address the cost of doing business, including by tackling the growing burden of business rates, packaging and employment taxes. Mike Watkins, head of retailer and business insight at NIQ, said retailers continued to keep prices low, helping consumers manage rising household costs such as energy and fuel.
For independent retailers the arithmetic is tighter still. The Association of Convenience Stores’ Local Shop Report, published on 7 September, put the sector’s business rates bill at £356m, nearly double the figure of two years ago, against sales growth of just 0.6% in a year when inflation ran at 2.9%. Our coverage of the ACS Local Shop Report and its doubled rates bill set out why investment by local shops has stalled even before the latest cost wave reaches the shelf.
The packaging and employment cost layer
Both the FDF and the BRC single out packaging as a cost line that is rising for regulatory rather than market reasons. The FDF’s September statement refers to mounting regulatory expenses for packaging and recycling and describes disruption as the new normal. The BRC, in its June index commentary, referred to a triple packaging tax alongside higher National Insurance contributions. Those costs do not fall when gas prices do, which is one reason the FDF’s peak has moved later rather than disappearing.
Employment costs are moving in the same direction. Changes under the Employment Rights Act take effect for shops from 1 October, and the national living wage rose again in April. None of these are individually decisive for food prices, but stacked on top of an energy shock they narrow the room manufacturers and retailers have to absorb commodity swings.
How are the supermarkets responding?
The grocers’ response has been to fight for volume rather than margin. Worldpanel’s August release recorded like-for-like grocery inflation of 2.1% in the four weeks to 9 August, with Tesco’s sales up 1.8% year on year over 12 weeks even as its market share edged lower for a third consecutive report. Sainsbury’s grew 3.5%, Ocado 13.1% and Lidl 8.5%. Fraser McKevitt, Worldpanel’s head of retail and consumer insight, said there had been a marginal drop in grocery price inflation but that the market was still well past the point at which price rises really start to bite, with consumers continuing to adapt their behaviour to make ends meet.
The discounters are the clearest beneficiaries of that behaviour. Aldi is opening a new store every week through September and has set a 1,500-store target; our report on Aldi’s store-a-week opening programme covered the £370m budget behind it. Lidl took the largest share gain of any grocer in the 12 weeks to 12 July, adding 0.5 percentage points, according to Worldpanel.
Grocery market share, 12 weeks to 12 July 2026
| Retailer | Market share | Sales growth, year on year |
|---|---|---|
| Tesco | 27.9% | +1.7% |
| Sainsbury’s | 15.2% | +2.8% |
| Asda | 11.5% | -1.1% |
| Aldi | 10.8% | +0.7% |
| Morrisons | 8.5% | +3.5% |
| Lidl | n/a (share up 0.5 points) | +8.6% |
| Waitrose | 4.4% | +2.5% |
| Ocado | 2.2% | +14.1% |
Source: Worldpanel by Numerator, published 21 July 2026. Grocery inflation in that period was 2.6%, the lowest since December 2024.
That competitive intensity is precisely what the FDF’s April model underestimated. When the big four and the discounters are trading share on price, cost increases at the factory gate arrive on the shelf later and in smaller steps. It is also why the value end of the market has held up through the cycle; our earlier analysis of why discount retailers are winning the post-inflation era argued that shoppers who traded down during 2022 and 2023 have largely not traded back up.
What will a Christmas shop cost in 2026?
The FDF’s most quotable number is the basket comparison. Using ONS data, it says a weekly grocery shop that cost £100 in January 2020 costs around £138.60 today (about USD 187 at current rates, with GBP 1 buying roughly USD 1.35), a rise of 38.6%. If the forecast is right, that same shop would cost approximately £147.50 (about USD 199) by July 2027, an additional £8.90 a week.
For a household that spends £120 a week on food, a 3.9% annual increase by December is worth around £4.70 a week, or a little over £240 a year. At the forecast July 2027 peak of 6.4%, the same basket would be costing roughly £7.70 a week more than a year earlier. Those are averages across the whole CPI food basket; the festive items most exposed to cocoa, sugar and wheat are likely to move by more, while fresh produce, where the BRC index has been easing, may move by less.
Which festive categories carry the most risk?
- Chocolate and confectionery: cocoa has more than doubled, and manufacturers have already shrunk pack sizes in previous seasons.
- Baked goods and stuffing: wheat is up 45%, so mince pies, bread and pastry are directly exposed.
- Hot drinks: coffee up 22% affects both retail packs and cafe prices.
- Frozen and chilled lines: electricity costs for cold storage are the hidden line in every frozen turkey and dessert.
- Fresh vegetables: the BRC’s fresh food measure eased slightly to 3.0% in August, but the FDF notes UK produce is up around 10% after the summer drought.
Why 16 September matters for this forecast
The next hard data point is the ONS consumer price inflation release for August, due at 07:00 on Wednesday 16 September. The July release put headline CPI at 2.9%, up from 2.6%, with CPIH at 3.1% and core inflation unchanged at 2.6%. The upward pressure came from housing and household services, particularly gas and electricity, while transport was the biggest offset because motor fuel prices fell. Food, at 1.3%, was a drag on the headline rate rather than a driver.
The August print will show whether the turn the BRC index picked up in shelf prices is visible in the official series. If food inflation moves back above 2% in August, the FDF’s 3.9% December path becomes the base case; if it stays near July’s 1.3%, the trade body’s model may once again be running ahead of the shelf. Either way, the release is the first of three in a row, and our preview of Friday’s ONS retail sales figures for August explains why the volume side of the picture already looked soft before the price data arrives.
The week ahead for UK retail data
| Date | Release or event | Why it matters for food prices |
|---|---|---|
| Wed 16 September, 07:00 | ONS consumer price inflation, August 2026 | First official read on whether food inflation has turned up from 1.3% |
| Thu 17 September | Bank of England rate decision | Sets borrowing costs for retailers and households into Christmas |
| Thu 17 September | Next plc half-year results | Bellwether for discretionary spending outside food |
| Fri 18 September, 07:00 | ONS retail sales, Great Britain, August 2026 | Volume versus value: are shoppers buying less as prices rise? |
| Tue 22 September | Kingfisher half-year results | Home improvement demand under higher energy bills |
| 1 October | Ofgem price cap rises 4%; Employment Rights Act changes begin | Two cost increases landing on the same day for shops and households |
What is the government’s position?
A Department for Environment, Food and Rural Affairs spokesperson responded to the FDF forecast by saying the Prime Minister had made clear that food security is national security and that the government was working with farmers and the food and drink industry to strengthen the UK’s resilience, according to PA Media. The spokesperson pointed to the suspension of import tariffs on everyday goods and to support for farmers hit by the recent drought.
The FDF’s asks have been consistent since April: include food and drink manufacturing in the British Industrial Competitiveness Scheme for support with industrial electricity bills, delay changes to the Nutrient Profiling Model, and scrap outdated regulations. In September, Betts warned that consumers would face sustained price increases into 2027 unless government action helped reduce the cost burden on producers, per Grocery Gazette. The BRC, for its part, wants the Autumn Budget scheduled for 28 October to tackle business rates, packaging levies and employment taxes.
None of those measures would change December’s number much. Energy support for manufacturers and a lighter regulatory calendar work on the 2027 peak, which is where the FDF has now placed the risk. Whether the Treasury has fiscal room for industrial energy relief in a Budget already expected to be tight is the open question for the sector.
What should independent food retailers do now?
For a high-street grocer, deli, bakery or cafe, the practical reading of the forecast is that supplier price increases will arrive steadily rather than in one shock, and that they will keep arriving through 2027. That argues for a few concrete steps in the next six weeks.
- Lock festive supply early. Confectionery, dried fruit, baking ingredients and coffee are the categories where commodity moves are largest. Confirming Christmas orders in September, with agreed prices, transfers some of the risk to the supplier.
- Re-price in small steps. The BRC index shows the multiples moving shelf prices by around 1% a month on food. Independents that hold prices for six months and then jump 8% lose customers; those that track the market in small increments generally do not.
- Audit energy contracts before 1 October. The domestic cap rises 4% on 1 October, and non-domestic contracts are exposed to the same wholesale gas market. Refrigeration-heavy businesses should know their unit rate and contract end date now.
- Use the cost story with customers. Shoppers have heard the Strait of Hormuz explanation all year. Clear, honest signage on why a line has gone up performs better than silent increases, particularly for local businesses whose customers know the owner.
- Check business rates relief. The retail, hospitality and leisure multipliers introduced in April sit 5p below the standard rates for eligible occupied properties below £500,000 rateable value. Any independent not yet on the lower multiplier should query it with the billing authority before the Budget.
The larger grocers will keep competing on price into Christmas because share is at stake. Sainsbury’s has been reporting consecutive quarters of share gains; our note on Sainsbury’s fifth straight quarter of grocery gains described how that was achieved through loyalty pricing rather than blanket cuts. Independents cannot match Nectar or Clubcard mechanics, but they can match the transparency.
How does the UK compare with the rest of Europe?
The FDF’s observation that UK electricity prices are among the highest in Europe is a structural point rather than a cyclical one. British food manufacturers were paying more for power than French or Spanish competitors before February, and the gas-driven shock since then has widened the gap because the UK’s electricity price is more closely tied to gas than the French nuclear-heavy grid. That is the basis for the FDF’s request to be included in the industrial electricity support scheme that already covers sectors such as steel and chemicals.
On food commodities, the UK is a price-taker. Wheat, cocoa, rice, sugar and coffee are traded globally, and sterling’s exchange rate determines how much of a dollar-denominated move reaches British shelves. At around USD 1.35 to the pound, sterling has not provided much cushion this year, which is one reason imported and processed ambient food was the fastest-rising category in the BRC’s August index.
Why the tail matters more than the peak
The most important sentence in the FDF’s September statement may be the least dramatic: prices are expected to remain above historic averages during the second half of 2027. A 6.4% peak that fades quickly is a shock; a 4% to 6% band that persists for 18 months is a regime. The latter compounds. Two years of 4% to 6% food inflation on top of the 38.6% rise since 2020 would leave the £100 basket of January 2020 close to £150 by the end of 2027 (about USD 203).
For a directory of local shops, the implication is that the shift in shopping behaviour Worldpanel describes, with consumers adapting to make ends meet, is not going to reverse in the festive quarter. Value, transparency and convenience will decide where the Christmas food budget is spent, and the independent shops that survive the cost wave will be the ones that treat the next 18 months as the operating environment rather than a temporary squeeze.
Frequently asked questions
What is the FDF’s new food inflation forecast for Christmas 2026?
The Food and Drink Federation expects food and non-alcoholic drink inflation of 3.9% by December 2026, according to its Food Inflation Forecast published on 9 September 2026. Its April forecast had projected 9% to 10%.
Why did the FDF lower its forecast from 9% to 3.9%?
Grocery Gazette reports that the revision reflects stronger resilience among manufacturers and lower-than-expected energy price pressures over the summer. Official ONS data for July showed food inflation easing to 1.3%, well below the path implied by the April model.
Does the lower forecast mean food prices will stop rising?
No. The FDF now expects inflation to keep rising through 2027, peaking at 6.4% in July 2027 and staying above historic averages for the rest of that year. The peak has moved later rather than gone away.
How much has a weekly food shop risen since 2020?
Using ONS data, the FDF says a £100 grocery shop from January 2020 costs around £138.60 today, a rise of 38.6%. It projects the same basket could cost about £147.50 by July 2027.
What is driving food inflation in the UK right now?
The FDF cites gas prices that have more than doubled since February, UK diesel up 28.6% since the Middle East conflict began, high UK electricity prices, and commodity increases including wheat up 45%, cocoa more than doubled, rice up 60%, sugar up 27% and coffee up 22%. Extreme summer heat and packaging regulation costs add to the pressure.
What does the BRC Shop Price Index say about food prices?
The BRC-NIQ Shop Price Index for August 2026 showed food inflation at 2.8%, up from 2.2% in July, with fresh food at 3.0% and ambient food at 2.5%. Overall shop price inflation was 1.5%, the highest since February 2024.
When is the next official UK inflation figure published?
The ONS publishes consumer price inflation for August 2026 at 07:00 on Wednesday 16 September 2026. The July release showed headline CPI at 2.9% and food and non-alcoholic beverage inflation at 1.3%.
What has the government said in response?
A Defra spokesperson said the Prime Minister had made clear that food security is national security, and pointed to the suspension of import tariffs on everyday goods and support for farmers affected by the drought, according to PA Media.
What can small food retailers do about rising supplier costs?
Confirm festive orders and prices early, re-price in small regular steps rather than one large jump, review energy contracts before the 1 October cap rise, be transparent with customers about why prices are changing, and check that the lower retail, hospitality and leisure business rates multiplier has been applied.