UK food and drink manufacturers are contending with intensified pricing pressures as food inflation ascended to 4.5% in the 12 months leading to December 2025. This increase from November’s 4.2% underscores a challenging conclusion to the year for an industry grappling with elevated production costs and diminished consumer confidence.
Recent data indicates a 0.8% rise in monthly food and non-alcoholic beverage prices in December, nearly doubling the 0.5% increase from the previous year. While commodities such as olive oil and flour experienced price reductions — decreasing by 13.8% and 6.5% respectively — other essentials saw significant price hikes. Beef and veal prices surged by 27.2%, with chocolate, whole milk, and coffee rising by 15.5%, 14.6%, and 13.7%, respectively.
Balwinder Dhoot, director of growth and sustainability at the Food and Drink Federation (FDF), remarked that 2025 was marked by compounding financial strains for the sector. Beyond the volatility of ingredient prices, manufacturers faced a new £1.1 billion Extended Producer Responsibility (EPR) packaging tax and a £410 million increase in National Insurance Contributions (NIC).
The FDF highlighted that since January 2020, input production costs — excluding labour and regulation — have soared by 39.9%. This surpasses the 38.6% rise in retail prices over the same period, indicating that manufacturers have been absorbing inflation to shield consumers, leading to constrained budgets and reduced margins across the industry.
James Walton, chief economist at IGD, confirmed that December’s figures align with expectations, placing the annual average for 2025 at 4.2%. However, he cautioned that immediate relief is unlikely. IGD projects food inflation to average 3.8% in 2026 and 3.3% in 2027, driven by global supply shortages and a challenging operational landscape.
Walton asserts that the industry remains under considerable supply chain stress. IGD suggests that maximising domestic production to balance supply with demand is crucial. Investment in UK horticulture and poultry could potentially augment annual domestic production by £1.3 billion by 2030, contingent on significant policy changes and government support.
The human impact of these statistics is reflected in data from the Office for National Statistics (ONS). By late 2025, 61% of adults in Great Britain reported a rise in their cost of living, with 95% attributing it to escalating food prices. Consequently, nearly 40% of consumers are reducing essential purchases.
The FDF is urging the government to enhance incentives for investment and productivity growth. Dhoot emphasised the necessity of these measures to shield the sector from future geopolitical shocks and to enable manufacturers to limit further price increases for already burdened households.
