Food inflation could peak lower but last into 2028, the Institute of Grocery Distribution (IGD) has found, citing a lag from the Middle East conflict sustaining cost pressures.
IGD said that while food inflation is “no longer expected to peak as high as a severe energy shock scenario”, the impact is now expected to last much longer, into 2028.
It forecast food inflation peaking at 5.5% in the second half of 2026, averaging 3.7%-4.7% across the year. IGD said the energy shock had not played out as the most severe of three scenarios it set out in March, but stated that the impact would continue for longer and would extend pressure on both food businesses and shoppers.
The impact of the US-Iran conflict on food inflation is still feeding through with a time lag, despite a peace deal reportedly being reached, meaning geopolitical, energy and supply chain pressures are “showing up and overlapping each other”. As a result, it said there will be sustained margin pressure for food businesses and ongoing uncertainty for shoppers.
Food inflation to stay above target
IGD now expects food inflation to remain elevated throughout 2027, averaging 3.2%-4.2%, and to stay above target into H1 2028, averaging 2.3%-3.3%. This comes on top of a sustained rise in prices that began in 2021, with UK retail food prices at the end of 2027 likely to be up more than 40% vs the pre-Covid level, which IGD said would leave households far more exposed to further price spikes. For shoppers, especially in lower-income households, it said pressure will “continue to intensify”, creating a more divided and less predictable environment for food businesses.
IGD data showed that food prices (94%) and energy bills (86%) are shoppers’ main worries, with food price concerns at their highest level for three years. It found that more shoppers were worried about food prices now than during the height of the cost-of-living challenges (94% in April 2026 vs 91% in January 2023).
James Walton, chief economist at IGD, commented: “The impact of geopolitical conflict usually takes time to filter through to raised food prices and therefore, despite the peace deal announced by the US, we expect food inflation to peak at 5.5% due to the disruption already experienced.
“Energy, labour and policy costs are continuing to build gradually, with many becoming structural rather than easing quickly, as well as climate risks which can affect supply. This is keeping sustained upward pressure on prices, which is expected to continue into 2028.
“While inflation may not peak as high as the most severe scenario, there is little room for relief as prolonged pressure will continue to weigh on both industry and household budgets, with an extra £203 to find this year for households with children. The businesses that pull ahead in this environment will be the ones building resilience and making sharper choices while uncertainty is still unfolding.”
