IGD (Institute of Grocery Distribution) has released updated food inflation forecasts showing that, while food inflation is no longer expected to peak as high as a severe energy shock scenario, the impact is now expected to last much longer, into 2028. This means households with children would need to find around £203 extra for food and drink this year, as well as another £207 for next year[1], versus current price levels.
IGD forecasts food inflation to peak at 5.5% in the second half of 2026, averaging 3.7-4.7% across the year. Whilst the energy shock has not played out as the most severe of three scenarios that IGD set out in March at 8%, the impact will continue for longer, which is extending pressure on both food businesses and shoppers.
Despite a peace deal having been announced by the US and Iran, the impact on food inflation is still feeding through with a time lag, meaning geopolitical, energy and supply chain pressures are showing up and overlapping each other. As a result, there will be sustained margin pressure for food businesses and ongoing uncertainty for shoppers.
IGD expects food inflation to remain elevated throughout 2027, averaging 3.2-4.2%, and to stay above target into H1 2028, averaging 2.3-3.3%. This comes on top of a sustained rise in prices that began in 2021, with UK retail food prices at the end of 2027 likely to be up over 40% vs the pre-Covid level, leaving households far more exposed to further price spikes. For shoppers, especially in lower-income households, pressure will continue to intensify, creating a more divided and less predictable environment for food businesses.
For many households, the risk is no longer just rising prices, but a return of cost-of-living anxiety. Consumers are increasingly tightening budgets in anticipation of further pressure rather than waiting for prices to rise and this is reflected in IGD’s Shopper Confidence Index which remained subdued at -2 in May 2026. IGD data shows food prices (94%) and energy bills (86%) are shoppers’ main worries, with food price concerns at their highest level for three years, with more shoppers worried about food prices now than during the height of the cost-of-living challenges (94% in Apr ’26 vs 91% in Jan ’23).
James Walton, chief economist at IGD, comments: “The impact of geopolitical conflict usually takes time to filter through to raised food prices and therefore, despite the peace deal announced by the US, we expect food inflation to peak at 5.5% due to the disruption already experienced. Energy, labour and policy costs are continuing to build gradually, with many becoming structural rather than easing quickly, as well as climate risks which can affect supply. This is keeping sustained upward pressure on prices, which is expected to continue into 2028.
“While inflation may not peak as high as the most severe scenario, there is little room for relief as prolonged pressure will continue to weigh on both industry and household budgets, with an extra £203 to find this year for households with children. The businesses that pull ahead in this environment will be the ones building resilience and making sharper choices while uncertainty is still unfolding.”
Despite extreme volatility across energy, commodities and policy, IGD will continue to monitor developments and provide updated forecasts as the situation evolves.
