The Institute of Grocery Distribution (IGD) has released a Viewpoint report, ‘New Government, new direction?’, predicting the ‘levelling off’ of food inflation in 2025.

Food inflation is expected to remain positive, and according to the forecast, it is expected to be at 0.1% in Q3 of this year. IGD said it will gradually rise to between 1% and 3% during 2025, creating a levelling off effect. IGD expects that the downward leg of inflation is nearly over.

Chief economist at IGD, James Walton said: “The UK will not return to a pre-‘crisis’ economy for some time. But the food system has a huge role to play in supporting economic resilience, growing GDP and providing jobs in our local communities.”

IGD said the report highlights the fact that food and consumer goods account for 7% of the UK economy, with the UK food system constituting the largest private sector employer. It said the result of this is that UK food and consumer goods can both continue to grow in value and increase household wealth and spending.

However, the report looks at the long-term, stating that the rise in minimum wage will be keenly felt by retailers who are already contending with increased costs and poor volume sales.

Shopper mood ‘tentative’

IGD’s ShopperVista data shows that the income divide between high and low earning households is still a ‘major factor’ affecting shopper confidence. It reported that of adults on a lower income, only 29% are expecting to be better off in the year ahead compared to 59% of those on higher incomes. Based on the survey, 62% of all adults are expecting food prices will be more expensive in the year ahead and only 13% expect food prices to fall over the coming year.

Added to this, a recent poll undertaken by IGD revealed that the current mood among shoppers is tentative post-election, with a modest view that financial conditions will improve.

Naomi Kissman, social impact director at IGD, said: “Our food system is critical to our UK economy and to driving growth. However, as we experience greater impacts of a changing climate and ongoing geo-political uncertainty, it is also facing a period of far greater risk. 

“Therefore, it’s encouraging to hear the new Government is prioritising boosting food security. There is a huge opportunity for businesses and policymakers to work in partnership to deliver a more resilient, sustainable and economically successful UK food system.”