Food Inflation Lower Than Feared But Cost Pressure Remains

Bumper UK crops and solid retail competition have helped to slow the rise in fresh food prices, with grocery inflation less severe than expected but underlying cost pressures continue to build, warns the boss of Sainsbury’s.

Fresh food inflation decreased notably to 2.8% year on year in June, against growth of 3.4% in May, according to the British Retail Consortium (BRC). This is below the three-month average of 3.3%.

Sainsbury’s chief executive Simon Roberts said to date grocery inflation in the UK has been lower than feared although there is “still uncertainty where inflation will go”.

As Sainsbury’s published its first-quarter results, Roberts suggested inflation may fall well below the feared 9% by the end of 2026 that was initially predicted by the Food and Drink Federation (FDF).

Summer Fruit Promotions Keep Prices Down

Improved UK availability of bumper seasonal crops, such as strawberries, coupled with competitive promotions among supermarkets for popular summer products have contributed to the slow down in rising food prices.

“Food price growth eased, and as shoppers made the most of the sunshine, retailers helped keep the prices of summer treats such as strawberries and ice cream low thanks to bumper crops and strong competition,” noted BRC’s Dickinson.

Added to that, the recent heatwave and start to World Cup football matches has led to “a lot of demand” for fresh fruit, as well as barbecue items and deli foods, according to Sainsbury’s.

This resulted in the retailer’s “biggest ever” week for sales of salads, ice cream, and pizza. 

Sainsbury’s Roberts said he expected food retail sales to increase again next week thanks to more hot weather forecast for the UK.

Already, several grocery retailers are pushing price promotions on UK-grown berries during the peak season following bumper crops driven by the hot weather, including Aldi, followed by Asda, Lidl, Morrisons, Tesco, and Sainsbury’s.

Government Support Needed As Pressure Persists

While a competitive market is keeping inflation in check for now, the BRC said retailers face mounting cost pressures.

These include higher National Insurance, the triple packaging tax, and higher input costs from extreme weather and geopolitical tensions, noted BRC’s Dickinson.

Sainsbury’s boss Roberts warned that “pressure in the system” remains as the retail industry holds out for the conflict in the Middle East to be resolved.

Roberts said he wants the expected next prime minister, Andy Burnham, to pursue measures that will boost consumer confidence and strengthen the economy. 

To that end, Roberts has repeated calls for lower energy costs for food manufacturers and greater support for employment, particularly initiatives aimed at helping more young people into work.

Government must reduce the costs of business to support the cost of living for households, echoed Dickinson.

“Starting with cutting the taxes and levies on energy bills would ease pressure on retailers and help keep prices down for customers,” she advised.

Food Inflation At Lowest Level 

According to the BRC, overall food inflation eased to the lowest level since March 2025, reaching 2.4% year-on-year last month, down from 2.7% in May.

Price reductions and higher levels of promotion have helped to keep food inflation lower than a year ago, noted Mike Watkins, Head of Retailer and Business Insight, NIQ.

“With the potential for increased demand during the summer of sport, retailers will be looking to keep prices as low as possible for as long as possible,” Watkins pointed out.