UK Food Inflation May Exceed 9% This Year, Even If Hormuz Reopens

UK food inflation could rise to at least 9% by the end of 2026 as the Iran war pushes up energy costs and disrupts supply chains, according to revised forecasts from the Food and Drink Federation (FDF). 

The trade body said its forecast has nearly tripled from an earlier estimate of 3.2%, and takes into account assumptions that the Strait of Hormuz will re-open within the next two to three weeks.

The outlook reflects a sharp deterioration in the outlook for the energy-intensive food and drink sector, which is facing multiple cost pressures.

Describing a “fast-moving” situation, the FDF said its revised projection assumes the Strait of Hormuz reopens within weeks, and that most major energy facilities in the region, including oil, gas, and fertiliser plants, return to normal within a year. 

But even so, it warned that higher costs for energy, transport, and packaging are feeding through to food prices already.

As such, the FDF now expects food and non-alcoholic drink inflation to reach 9-10% by the end of the year, after previously forecasting that the rate would gradually ease in 2026.

Rising Costs

The FDF said companies are facing a combination of surging energy bills and wider supply-chain pressures. 

The impact is likely to be felt more strongly in the coming months, presenting a significant challenge for businesses to absorb the ongoing pressures. 

Liliana Danila, the FDF’s chief economist, described the situation as “unprecedented”, and warned that food inflation was still set to climb.

“The current situation is unprecedented and hard to predict, however given the scale and speed of these cost increases, and despite companies’ best efforts not to pass price increases on, it’s clear that food inflation is going to rise in the months ahead,” Danila explained.

The warning comes as businesses prepare for a new round of energy contracts from April, which is expected to raise costs further. 

Household energy bills may fall temporarily before rising again later in the year, adding to pressure on consumers.

Political Pressure

The forecast comes as Chancellor Rachel Reeves was due to meet supermarket leaders to discuss the impact of the Middle East conflict on the UK cost of living and the possibility of shortages. 

The government is under pressure to offer some form of support, though ministers have indicated any help would be targeted mainly at vulnerable households.

UK growers have warned that supplies of some fresh produce, including greenhouse-grown salads and vegetables, could come under strain if energy costs continue to rise. 

Industry figures say retailers and suppliers will need to work together to avoid the worst of the squeeze being passed on to shoppers.