British shoppers may face fresh financial pressure in 2025, with food prices projected to increase by as much as 4.9%. This rise is largely attributed to higher business costs stemming from

measures in the government’s budget, according to a leading grocery industry researcher.

The Institute of Grocery Distribution (IGD) has forecast food inflation for 2025 to range between 2.4% and 4.9%.

Food price inflation in the UK peaked at over 19% in March 2023, the highest since 1977. However, it has since eased, dropping to 1.9% in October 2024, according to official data.

While energy and commodity prices are expected to rise slightly in 2025, the IGD highlighted that food businesses will also face significantly increased employment and regulatory costs.

Starting in April, companies will contend with higher employment costs due to increases in National Insurance contributions and the minimum wage, introduced in the Labour government’s October budget. This budget has faced widespread criticism from the business community, which argues it will drive inflation higher.

In addition, food businesses will encounter increased import costs beginning in July. These are tied to the final phase of post-Brexit border changes, which will introduce stricter checks on fruit and vegetables entering the UK from the European Union.

Further cost pressures will come in October, with higher packaging expenses resulting from new regulatory changes.

The IGD estimates that the food sector can absorb only 20% to 40% of these additional costs, meaning the majority will be passed on to consumers.

“The rising cost of living, combined with increased employment and regulatory expenses, will keep inflation elevated,” said James Walton, IGD’s chief economist. “Consumers will undoubtedly look for ways to save money, but these cost pressures will ripple across the economy.”

The Bank of England recently projected that annual food price inflation will average 1.1% over the next six months. Its overall inflation forecast for 2025 is an average of 2.75%. Photo by Food Hall, Scunthorpe Indoor Market by David Wright, Wikimedia commons.