UK shoppers could face another sharp rise in grocery bills this year, with food inflation forecast to climb above 8 per cent by June 2026 in a worst-case scenario driven by disruption in the Middle East.
New forecasts from IGD suggest prolonged instability in the region could trigger a fresh energy shock that ripples through the food and drink supply chain, pushing up production, transport and fertiliser costs and putting renewed pressure on already stretched household budgets.
The warning comes as the latest inflation data showed food and non-alcoholic drink prices rose by 3.3 per cent in the 12 months to February 2026, down slightly from 3.6 per cent in January. On a monthly basis, prices were unchanged.
While the February figures offered some relief, industry leaders warned the easing may prove temporary.
Karen Betts, chief executive of the Food and Drink Federation, said the dip in food inflation could be “the calm before the storm” if conflict in the Middle East continues and energy markets remain volatile.
“The longer the conflict in the Middle East goes on, the bigger its impact will be on food prices,” she said.
“With food and drink price inflation already running above historical averages, heightened energy, maritime fuel and fertiliser costs will put further pressure on prices.
“Food and drink is an essential, bought by every household, every week. While it can take several months for cost rises to filter fully through to shop shelves, the cost of the Iran conflict will be felt by shoppers this year.”
Betts added that if government is serious about tackling the cost of living, it must offer food manufacturers support comparable to that given to other industrial sectors.
She said the industry is already contending with a series of structural pressures, including the after-effects of the war in Ukraine, the costs of food law realignment with the EU and new regulatory burdens.
IGD’s updated modelling sets out three scenarios for 2026. In its most severe but short-lived energy shock scenario, food inflation would peak at more than 8 per cent by June, with average food inflation reaching around 6.4 per cent across the year. That would add more than £150 to the average household’s annual grocery bill.
Even under IGD’s baseline forecast, which assumes no escalation linked to the Middle East conflict, retail food inflation is expected to average 3.8 per cent across 2026. According to the organisation, that would still leave UK consumers needing to spend close to £10bn more to buy the same basket of food.
A middle scenario, based on a more moderate temporary energy shock, would see food inflation average around 4.8 per cent this year.
The forecasts underline how exposed the food system remains to geopolitical disruption, with oil and gas still playing a central role across farming, manufacturing, logistics and retail operations.
James Walton, chief economist at IGD, said: “Even in the best case scenario, the conflict in the Middle East is likely to prolong the timeline for recovery from the cost of living crisis.
“If the energy shock is more severe, food inflation could reach over 8 per cent by June 2026 versus 3.6 per cent now, which would add over £150 onto the average household grocery bill per year.”
Walton also pushed back against suggestions that higher food prices automatically translate into stronger profits for food businesses, arguing that margins remain exceptionally tight across much of the sector.
“Our Food Pound analysis shows that the evidence points in the opposite direction: margins for basic food and drink remain exceptionally thin, and in many cases have fallen in recent years,” he said.
“For example, margins on nine everyday food items average just 1.5 per cent across the supply chain, with items such as chicken breast sold at cost and beef mince generating under 1 per cent margin.”
He said that when margins are that tight, businesses have limited room to absorb shocks, invest in resilience or shield supply chains from further volatility.
“The most sustainable route to moderating food inflation is not cost absorption, but improving productivity, resilience and availability,” Walton added. “This includes investment in domestic production, supply-chain efficiency and policy approaches that avoid adding unnecessary cost and volatility to the system.”
Industry data already points to cost pressures building behind the scenes. Members of the FDF have reported that UK haulage firms have introduced emergency fuel surcharges of up to 20 per cent, while ocean freight lines have added emergency bunker surcharges of around $400 per container to offset higher oil costs.
The latest Office for National Statistics breakdown shows prices fell across nine food categories in February, with the sharpest declines seen in olive oil, down 10.4 per cent, flour, down 8.3 per cent, and pizza, down 4.9 per cent.
However, other categories continued to climb rapidly, with beef and veal up 20.6 per cent, offal up 17 per cent and whole milk up 13.1 per cent year on year.
Pieter Reynders, partner at McKinsey & Company, said the overall inflation picture remains fragile despite February’s pause.
“Inflation treaded water in February, sticking at 3.0 per cent, after a choppy downward trend over the past six months,” he said. “But, with ongoing pressures on input prices and supply chains, the inflation trend is likely to be challenged.”
He added that while food and non-alcoholic beverages had eased to their lowest rate since March 2025, households were still facing pressure in non-essential categories such as restaurants and hotels, where inflation remained at 4 per cent.
McKinsey research found that 35 per cent of UK consumers plan to spend less than usual on restaurants over the next three months, while 52 per cent now cite inflation as their top concern, up from 50 per cent a year ago.
For retailers and suppliers alike, the concern is that February’s stability may prove fleeting. Much will depend on how long the conflict lasts, how severely oil and gas infrastructure is affected and how quickly higher costs feed through the supply chain.
For now, food inflation has slowed. But across the industry, few seem convinced it will stay that way.
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