Grocery analyst has examined the trading scene for the months ahead
The UK’s political position is arguably the most stable it has been for a decade, but the uncertainty of the new US administration’s trade approach is creating uncertainty.
That’s according to grocery analysts IGD, which has published a viewpoint looking at the UK’s position in the current global market.
The report notes that US President Trump’s approach to import/export tariffs risks escalating trade disputes, with the broader impacts of this potentially indirectly threatening the UK food system at a time of slow growth, persistent inflation and tentative recovery.
The report shows a domestic picture of tentative recovery as 2025 kicked off with muted business and shopper confidence and slow GDP growth.
IGD chief economist James Walton said: ‘President Trump advocates for tariffs to protect US industry. If he implements new tariffs in his second term, UK food and drink businesses may be impacted.
“However, the US is not a primary partner for UK trade. While the short-term impact may be challenging for some, the longer-term effects will depend on how the global trade environment evolves and how businesses respond to changing geopolitical and economic conditions.”
Michael Freedman, head of economic and consumer insight at IGD, stressed that the current combination of weak growth and inflation is “a difficult one”, threatening stagflation, which is hard to deal with via monetary policy.
Shoppers have become accustomed to saving money with loyalty cards and buying more products on promotion, with lower-income groups planning to cut back their grocery and eating-out spend, he added. As many as 81 per cent of shoppers expect food prices to increase and 63 per cent plan to use loyalty cards more.
The industry view
Pressures on food businesses themselves are shown to come from many directions, with inflation particularly rising in the out-of-home sector, where labour costs are increasing alongside labour demand.
Added to these challenges are the pressures of legislative compliance, IGD points out. The long-awaited Extended Producer Responsibility scheme is due to come into effect in October this year, transferring the environmental impact costs of packaging to manufacturers.
On a positive note, the new government has shown an appetite for putting new strategy in place that could leverage the UK’s political stability to power sustainable growth.
Matthew Stoughton-Harris, head of corporate affairs at IGD, said: “Domestic political stability provides the government with an opportunity to deliver against its strategic vision as set out towards the end of 2024, through the Plan for Change and Industrial Strategy. The new food strategy is a significant step in the new government’s approach to the food system and once defined, is likely to shape our food system for years to come.”
Although current government plans may not yet consider the rapidly changing geopolitical landscape, IGD believes that a food strategy co-created by industry and government would provide a significant opportunity to boost resilience and unlock growth opportunities across the whole system, including supporting shoppers towards healthy and sustainable choices.
