UK food inflation remains notably high, surpassing that of other European countries like France, Germany, and Spain, with July 2025 figures at 4.9%, driven largely by domestic policies and regulatory costs.

The primary contributors to this inflation include increased costs from government regulation, such as higher employer National Insurance Contributions and a £1.1 billion packaging tax under the Extended Producer Responsibility scheme.

Experts from the Food and Drink Federation (FDF) explain that recent inflation spikes are mainly due to domestic policy impacts and supply chain disruptions, despite energy and raw material costs stabilizing.

While manufacturers had absorbed rising costs for years, the increase in production expenses—up 6.3% in 2024—has led to higher prices on supermarket shelves, affecting household budgets, with consumers now spending nearly double on food and drink compared to energy.

The shift from cost absorption to passing costs onto consumers is driven by financial pressures, as rising taxes, employment costs, and packaging fees make it unsustainable for manufacturers to continue absorbing expenses.

Industry leaders suggest government support for automation, reduction of costly regulations like the £1.1 billion EPR fees, and favorable trade negotiations with the EU to help mitigate inflation and strengthen sector resilience.

Initial inflation was fueled by surging production costs, including a 51% rise in agricultural commodity prices and quadrupling of UK gas prices, but these costs largely stabilized in 2024, yet inflation remains high.

The FDF warns that UK food and drink inflation could reach 5.7% by the end of 2025, up from previous forecasts, as rising costs continue to trickle down to consumers.

The FDF's revised forecast indicates a significant increase from the earlier estimate of 4.8%, emphasizing the ongoing pressure on household budgets.

FDF CEO Karen Betts highlights that rising taxes, employment costs, and packaging fees are making it impossible for companies to absorb costs, leading to price hikes.

Between January 2020 and July 2025, UK food and non-alcoholic drink prices surged by 37%, outpacing the 28% rise in overall prices, with notable increases in sugar (56%), milk (46%), and cheese (31%).