The Food and Drink Federation has issued a stark warning that food prices are poised to surge by as much as 10 per cent in 2026, a direct consequence of the ongoing Iran war and escalating fuel and energy costs. This forecast marks a significant upward revision from earlier predictions of 3.2 per cent inflation, highlighting the severe economic pressures facing consumers.
Sharp Rise in Grocery Bills Predicted
Grocery shopping bills, which experienced sharp increases during the 2022 and 2023 cost of living crises, are heading for another substantial rise later this year. The FDF, representing 12,000 food and drink manufacturers, has adjusted its inflation forecast to between 8 and 10 per cent, citing unprecedented challenges in the sector.
Historical data from the FDF shows that food inflation peaked at 10.9 per cent in 2022 and worsened to 14.6 per cent in 2023. Although it moderated to 2.7 per cent in 2024 and 4.2 per cent in 2025, the current geopolitical situation is expected to drive a huge rise in the second half of 2026.
Impact on Household Budgets
Assuming food inflation lands at the mid-point of the FDF forecast, 9.5 per cent, the financial impact on households could be severe. Research indicates that the average UK household spends £119 weekly on food shopping, totalling £6,188 annually. A 9.5 per cent increase would add approximately £588 per year, raising weekly costs to over £130 and annual expenses to £6,775.
Consumer review site Which? provides context: at the start of 2026, an average basket of 89 products cost £161.56 at Aldi and up to £217.02 at Waitrose. With the projected inflation, these costs could rise to £176.91 and £237.64 respectively, assuming uniform price hikes across all supermarkets.
Government and Industry Response
Chancellor Rachel Reeves is scheduled to meet with supermarket chiefs from Sainsbury's and Tesco on Wednesday to discuss the impending impact of price rises on the cost of living. The Treasury has described these talks as fact-finding conversations aimed at assessing the situation.
Last month, Asda boss Allan Leighton urged the Labour government to provide more support for businesses, arguing that current policies have created a lot of constraints. The FDF has also repeatedly called for government assistance to offset rising energy bills, similar to support offered in other manufacturing sectors.
Underlying Causes of Inflation
Dr Liliana Danila, chief economist at the FDF, explained that the food and drink sector is already feeling the force of this geopolitical shock. The current situation is unprecedented and hard to predict, she said, noting that manufacturers face mounting energy bills, rising transport and packaging costs, and disruption across key supply chains.
Specific factors include an 80 per cent increase in diesel prices since the start of the war, affecting farm machinery, and potential further rises in fertiliser costs with constrained supply. Additionally, UK firms have lost sales due to cancelled shipments to the Middle East, where exports of cheese, cereals, and chocolate are common.
Forecast Assumptions and Future Outlook
The FDF's upgraded inflation figures are based on assumptions that the Strait of Hormuz will open to cargo traffic within the next two to three weeks, as suggested by Donald Trump, and that commodities like oil, gas, and fertiliser production will normalise within a year. However, the federation emphasises that these pressures are hitting simultaneously, posing a significant challenge for businesses to absorb without passing costs to consumers.
Despite companies' best efforts to avoid price increases, the scale and speed of cost rises make it clear that food inflation will escalate in the coming months. This development adds to the ongoing strain on household budgets, with the Iran war continuing to disrupt global supply chains and drive up essential costs.
