Latest IGD report lays bare complex challenges facing the grocery sector
The UK food industry faces heightened uncertainty thanks to persistent inflationary pressures and geopolitical tensions, according to the IGD.
The grocery industry charity’s latest Viewpoint Quarterly report highlights a fragile economic outlook, with recent hopes of stabilisation undermined by renewed global disruption, including US action in Venezuela and increasing geopolitical unease surrounding Greenland and NATO.
IGD warned that this instability is adding fresh layers of complexity for the food system, impacting both business decision making and consumer confidence.
Going into more detail, the report found that geopolitical unpredictability has become the norm, and IGD urged food and drink businesses to review their supply chain vulnerability and, where possible, look for ways to re-shore or near-shore supply.
Real GDP growth for 2025 is likely to be 1.2 to 1.5 per cent, with little improvement in 2026. That represents subdued performance by historical standards, IGD noted, adding that a focus on driving ‘good growth’ within the food system will be key for food businesses.
IGD predicts that food and drink inflation will only ease slowly, averaging 3.8 per cent over 2026, compared to 4.2 per cent for 2025. The differential between food and overall inflation will therefore persist, it said.
It added that in a price-led market where volumes are not improving, the only way for businesses to grow will be to take share from a rival, so loyalty will be a key measure.
Some 30 per cent of shoppers plan to cut grocery spending and 42 per cent expect to cut back on eating-out spend in the next few months, but intentions do not always translate into actual behaviour, especially if economic conditions deteriorate. IGD has therefore cautioned businesses to watch for early warning signs and act promptly.
Finally, labour supply challenges continue across the food system, with IGD noting that transforming supply chains will also require reshaping the workforce and attracting new skills.
James Walton, IGD chief economist, said: “The UK food system has faced ongoing disruptions, from geopolitical turbulence to a stagnant UK economy and nearly two decades of flat household prosperity. Despite this, the industry still has significant potential, provided it is futureproofed. Food and drink businesses cannot wait; they need to move faster to build the future they want.”
