Retailers Push Government On Rising Food Prices Amid ‘Cost Of Farming Crisis’

The UK government is being urged to tackle “soaring domestic policy costs” after new polling shows four in five people (80%) fear the Middle East conflict will push up the cost of food, while bank data indicates agricultural businesses are experiencing “elevated financial stress”.

The British Retail Consortium (BRC) is calling on ministers to act on costs that are within government's control, including non-commodity energy charges, food reformulation rules, and packaging levies.

Accepting that food prices will rise inevitably this year, the BRC warned that the level of inflation will depend on how the government acts now. 

Food prices in the UK are predicted to rise by 50% by November 2026, compared with the start of the cost-of-living crisis in mid-2021, according to the latest analysis from the Energy and Climate Intelligence Unit (ECIU).

Food Producers Face Crisis

Soaring energy and fertiliser costs are continuing to affect food production as UK farmers and growers struggle to absorb rising input costs on top of already stretched farming budgets.

A new Bank of England report confirms that farming will be one of the nation’s industries most impacted by the US-Iran war, highlighting the financial strain that farmers are under as fuel and fertiliser costs continue to fluctuate. 

The Bank of England’s (BoE) agents have singled out agriculture as a sector experiencing “elevated financial stress”, alongside hospitality, retail and construction.

A “Cost of Farming Crisis” is emerging in the UK, according to farming consultancy The Andersons Centre, which estimates that agricultural input inflation has more than doubled general inflation rates.

So-called ‘agflation’ has reached 8.4% annually, it said, running “well ahead” of CPI at 3.3% and CPI Food at 3.5%, while agricultural outputs have fallen by 5.8% year-on-year.

This divergent gap – between rising input costs and falling output returns – represents “one of the most challenging margin environments” that UK farmers have faced in years, Andersons warned.

Image: The Andersons Centre

Following the BoE's analysis, the National Farmers Union (NFU) said it is working with the UK government “at the highest level”, and regularly feeding back to its banking contacts to ensure farmers are supported. 

"There is so far more concern over food inflation than for most other goods due to higher energy, transport, and agricultural costs,” the latest BoE summary said. 

“This is something that needs to be taken very seriously – farmers and growers can’t absorb additional increases in costs,” stressed NFU Deputy President Paul Tompkins.

“This report is suggesting that food price inflation is expected to reach 6-7% through the year due to rising costs, yet farmers are unlikely to see much of that return,” he added.

“We will continue to work with government at the highest level on what it can do to support the sector at this challenging time,” Tompkins assured.

BRC’s Three Key Requests

UK food retailers, meanwhile, have set out three specific asks for Chancellor Rachel Reeves.

Firstly, to remove non-commodity energy costs; secondly, to delay the implementation of the Nutrient Profiling Model; and thirdly, to review the triple packaging levy.

With retailers unable to continue to hold down prices alone despite their best efforts, Helen Dickinson, BRC’s chief executive, said the window to act is closing.

“Every cost government chooses not to address is a cost that will find its way into someone’' shopping basket,” she commented.

"The Middle East conflict is driving up costs across the supply chain and families are right to be concerned. But not every pressure bearing down on retailers comes from the Gulf. 

“Higher national insurance, packaging levies, new regulations, and business energy charges are all domestic policy decisions, made in Westminster, and they can be addressed there. Such action by government would help retailers to keep prices affordable for households.”

The warning to government comes as new polling by Opinium for the BRC lays bare the scale of public anxiety in the UK. 

Four in five people (80%) fear the conflict will push up food prices, while 73% expect it to raise the price of other products.

UK Food System Under Pressure

The UK’s food system is straining under the weight of compounded pressures caused by extreme weather driven by climate change, global supply disruptions, and continued exposure to volatile oil and gas market, according to the ECIU.

Already, staple foods including pasta (+50%), frozen vegetables (+55%), chocolate (+58%), eggs (+59%), beef (+64%), and olive oil (+113%) have seen some of the steepest price increases. 

“Trump’s war in the Middle East is set to drive shopping bills higher as oil and gas prices spike,” stated Chris Jaccarini, food and farming analyst at the ECIU. 

“Scientists are predicting 2027 to be the hottest year on record with climate change combining with the El Nino effect kicking off this year. Three of England’s worst harvests on record have been in the past five years,” he added.

“Unless we get to net zero emissions to stop climate change and bring balance to the system, food prices will spiral ever further, but net zero also means burning less oil and gas, so insulating our food system from the kind of price spikes we’ve been seeing since Russian invaded Ukraine,” Jaccarini concluded.