Food prices in the UK are expected to surge by almost 10% by the end of this year as a result of the ongoing conflict in Iran, the Food and Drink Federation (FDF) cautioned on Wednesday. This projection is nearly three times higher than their earlier estimate.
The FDF, representing around 12,000 food and drink manufacturers across the UK, had previously forecasted that inflation for food and non-alcoholic beverages would ease to 3.2% by December 2026. However, the new outlook anticipates inflation climbing above 9% by that time.
This forecast assumes that the critical Strait of Hormuz shipping lane will reopen to cargo traffic within two to three weeks and that essential facilities—including those for oil, gas, and fertilizer production—will resume normal operations within a year. The FDF also warned that food inflation could escalate further if disruptions persist longer or if energy supplies face more severe interruptions.
In a significant development, the federation highlighted the economic risks stemming from the conflict, which have led central banks to halt plans for interest rate reductions and prompted governments to explore measures to support businesses and consumers.
The food industry is particularly vulnerable to shocks in oil and gas markets due to its high energy consumption and dependence on intricate global supply chains. While many medium and large companies mitigate energy price volatility through contracts of varying durations, they are preparing for steep cost increases as these agreements expire. Smaller producers, who generally purchase energy on spot markets, are already confronting sharp price hikes.
“Despite efforts by companies to avoid passing on cost increases, it is evident that food inflation will rise in the coming months,” stated Liliana Danila, chief economist at the FDF.
The initial impact of the Iran war on UK household expenses has been noticeable at fuel stations, where elevated energy prices have driven up costs for motorists. Additionally, farmers have issued warnings about rising food prices starting next month, particularly for tomatoes, cucumbers, and peppers cultivated in heated greenhouses.
Meanwhile, UK grocery inflation remained steady at 4.3% during the four weeks ending March 22, data from research firm Worldpanel by Numerator.
