Rising Energy Prices Push Up UK Food and Drink Costs
- gillmcshane
- Sep 10
- 4 min read
Rising energy bills this winter are set to squeeze UK households twice over. Not only will gas and electricity bills rise again under the October price cap, but those same costs are feeding directly into the price of food and drink. From supermarkets and wholesalers to pubs, cafés and restaurants, higher energy costs are shaping the price of everyday goods and services.
Industry analysts warn that the ripple effect of rising energy costs is now one of the most important drivers of UK inflation. This matters for household budgets, retail food prices, and even Bank of England decisions on interest rates.
The October Price Cap Rise Sets the Scene
According to the latest figures from Ofgem, the energy price cap for 1 October to 31 December 2025 will rise to £1,755 a year for a typical dual-fuel household paying by direct debit. That is a 2 per cent increase from £1,720 in the previous quarter.
Although far below the extreme levels seen during 2022 and 2023, the cap remains well above historic norms. For households, that means another increase just as winter heating demand begins to climb. For businesses, which are not protected by the domestic cap, the signal is clear: energy will remain a costly input through the end of the year.
Why Food and Drink Costs Rise When Energy Prices Climb
Energy is involved at every stage of the food and drink supply chain:
Farming and production: Cooking, baking, pasteurising and bottling require continuous heat and power. Breweries and distilleries are especially energy-intensive, needing both high temperatures and controlled cooling during production.
Cold storage and distribution: The Cold Chain Federation notes that nearly half of the UK’s food and drink output requires refrigeration or freezing. Every rise in electricity costs multiplies across warehouses, distribution centres and chilled transport fleets.
Retail and hospitality: Supermarkets keep chilled aisles and freezers running 24 hours a day. Pubs, cafés and restaurants use gas and electricity for ovens, fryers, fridges and climate control.
UK Hospitality has said energy became the single biggest concern for venues during the crisis, with some bills rising by 80 per cent compared with pre-2021 levels. Even with wholesale prices off their peaks, many businesses are still locked into contracts signed when costs were higher, and standing charges remain elevated.
Recent Food Inflation Trends
According to the Office for National Statistics, annual inflation in food and non-alcoholic drinks peaked at 19.2 per cent in March 2023, the highest level since the late 1970s. That figure has since eased, but prices remain high by historic standards.
In July 2025, food and drink inflation rose to 4.9 per cent, up from 4.5 per cent in June and marking the fourth consecutive monthly increase. Essentials such as bread, milk, pasta and beer are still significantly more expensive than in 2019 or 2020.
This matters because food makes up a large share of the typical household budget. When energy prices push food inflation higher, the overall Consumer Prices Index rises too, forcing policymakers to act.
The Bank of England Connection
The Bank of England has repeatedly highlighted energy and food costs as drivers of stubborn inflation. In August 2025 the Bank Rate was reduced to 4 per cent, but officials stressed that further cuts would depend on how sticky inflation proves through autumn and winter.
The Bank expects inflation to peak at around 4 per cent in September before easing back towards its 2 per cent target, but warned of risks from “second-round effects”. These occur when higher energy prices lift food, hospitality and wage costs, making inflation more persistent.
For households, the link is direct. Higher interest rates increase the cost of mortgages, loans and credit cards. Combined with higher food and energy bills, disposable income is squeezed from multiple directions.
Where Higher Costs Show Up
Supermarkets
Supermarkets spend heavily on refrigeration, lighting and heating. A step up in energy bills affects their operating costs, particularly in chilled and frozen food aisles. While the biggest chains can absorb some rises through efficiency, persistent increases often flow through to shelf prices.
Manufacturers and processors
Ovens, fryers, pasteurisers and bottling lines all depend on reliable energy. When electricity and gas bills climb, unit production costs increase. Fertiliser and packaging – both energy-sensitive products – add further cost pressure.
The cold chain
The UK’s ‘cold chain’ underpins almost half of all food and drink output. Refrigerated warehouses, chilled distribution centres and freezer lorries all run on power. Rising electricity costs ripple through the system, with suppliers passing charges along to retailers and ultimately shoppers.
Hospitality
Restaurants, cafés, pubs and takeaways are highly exposed to energy costs. During the height of the crisis, many cut opening hours, simplified menus or raised prices simply to survive. Even today, energy remains one of the most unpredictable and volatile inputs for the sector.
Impact on UK Households
Households feel the pressure in two ways:
At home: Higher heating and electricity bills under the October cap.
In the shops and restaurants: Higher prices for essentials and eating out.
Lower-income families are hit hardest. They spend a greater share of their income on food and utilities, meaning every rise has an immediate impact. Households with variable-rate mortgages feel an extra squeeze as interest rates remain high.
Key Data Points
Energy price cap: £1,755 from October 2025 (Ofgem).
Food inflation: 4.9 per cent in July 2025, after peaking at 19.2 per cent in March 2023 (ONS).
Bank Rate: 4 per cent in August 2025, with further decisions depending on inflation trends (Bank of England).
Cold chain exposure: 49 per cent of UK food and drink output needs chilling or freezing (Cold Chain Federation).
Hospitality impact: Energy bills rose by around 80 per cent for many venues during the crisis (UKHospitality).
Looking Ahead to Winter
When the new cap takes effect in October, households will pay more for heating just as food prices are already edging higher. Businesses will continue facing elevated input costs, and inflation is expected to peak again before falling back in 2026.
While supermarkets and producers will work on efficiency – from energy-saving refrigeration to on-site solar generation – the immediate reality is that energy remains a major cost driver. The combined effect on household bills and weekly shopping is unlikely to ease before spring.