Retail food inflation expected to outpace general inflation, averaging four per cent in 2025, up from previous forecast of 3.4 per cent
IGD’s latest Viewpoint report forecasts that retail food inflation will peak at 5.1 per cent in late summer 2025, significantly outpacing general inflation.
This rise is expected to place further pressure on both households and businesses, as the UK economy continues to grapple with sluggish growth and persistent price pressures.
The report, entitled UK Food Inflation Forecasts 2025–2027, also outlines that food prices are now the top concern for UK shoppers, overtaking worries about energy costs, as they brace themselves for higher food bills in 2025.
Looking ahead to 2027, the report offers cautious optimism, forecasting a gradual decline in food inflation to 1.8 per cent by mid-2027. However, the near-term outlook remains challenging, with inflationary pressures fuelled by what IGD calls “a potent mix of regulatory costs, extreme weather events, and global commodity volatility”.
According to IGD’s latest data, 83 per cent of shoppers now expect escalating retail food prices, while 81 per cent are similarly concerned about away-from-home costs. This mounting unease is reflected in the IGD Shopper Confidence Index, which dipped to +1 in June, down two points from May, with three-quarters of consumers anticipating tax hikes.
As the busy Christmas season approaches, consumer sentiment remains fragile amid ongoing geopolitical tensions and persistent pricing pressures.
Michael Freedman, head of economic and consumer insight at IGD, said: “Amid economic uncertainty, shoppers are cautious with their finances, increasing private label purchases while reducing impulse and indulgence buys. We identified that only 29 per cent of consumers plan to cut back on grocery spending, suggesting many have already tightened their budgets and have little room to cut back further.
“Instead, shoppers are more likely to look for savings on discretionary purchases like clothing and eating out, underscoring a clear prioritisation of food shopping over other categories. Businesses should adapt to shifting customer behaviours by offering value, convenience, and memorable experiences to attract customers and drive growth.”
As these patterns emerge, a deeper polarisation is becoming evident among shoppers. One in four (25 per cent) expects their financial situation to worsen in the year ahead, with this figure rising sharply to 41 per cent among lower-income households – a ten-point increase since May 2024. By contrast, only 11 per cent of higher earners now expect to be worse off, a decrease of five points.
While financially secure consumers remain open to treating themselves through premium dine-in experiences and impulse buys, innovation is increasingly being driven by Gen Z, whose curiosity for new cuisines and novel formats is opening up fresh opportunities for businesses to engage and develop new offerings within the food sector.
IGD said its report “calls on retailers, manufacturers and policymakers to stay closely attuned to shifting consumer behaviours, particularly around value, convenience, and experience, as they navigate the road ahead”.
