The Institute of Grocery Distribution (IGD) has revealed in an industry forecast that although the UK grocery market returned to real growth in 2024, inflation is still the main driver of growth.

The UK Retail Grocery Channel Forecasts report, which includes predictions for in-store, online and convenience grocery shopping until 2029, has assessed factors currently affecting UK grocery. According to IGD, the report offers a “low, medium and high growth view of the future”.

The organisation said that while real terms market growth had advanced by 2.4%, the main driver of growth is still inflation. Real terms growth is expected to continue at a lower level during 2025-26, while the report showed that real market growth is not expected to rise above 1% for the rest of the forecast.

Meanwhile, said IGD, shoppers were still using money saving tactics developed due to cost-of-living concerns. Real wage growth is expected to return to its 2008 rate in 2026, although the report anticipates a higher tax burden on households later in the forecast.

Online and convenience retailing to increase

Convenience and online channels are reportedly set to boom over the next five years, while stores focus on expanding their fresh-food offer with ranges catering to local shoppers’ needs.

Alex Rowberry, senior analyst at IGD, said: “IGD believes businesses should prepare for a mid-growth scenario: UK economic growth remains low, and inflation remains the driver of grocery market performance, as real market growth remains contracted.”

IGD said that advances in technology were also expected to propel the growth of online retail “as the customer experience improves” and more product availability is offered via this channel. It also said that supermarkets were predicted to see the highest growth in value.