Official data released today by the Office for National Statistics (ONS) shows food inflation in the UK has hit its highest level since February 2024 as retailers and manufacturers passed on increased costs to consumers.
The price of food and non-alcoholic beverages rose 4.4% year-on-year during May, compared to 3.4% in April. On a monthly basis, prices rose by 0.7%, compared with a fall of 0.3% a year ago.
The ONS noted that there were upward effects from 7 of the 11 food and non-alcoholic beverages classes, with the largest coming from the sugar, jam, syrups, chocolate and confectionery class. Within this, prices of chocolate, confectionery, and ice cream rose between April and May of this year but fell between the same two months a year ago. There was also a small upward effect from meat, where, on a monthly basis, prices rose by more in May 2025 than in May 2024.
Ruth Gregory, deputy Chief Economist at Capital Economics, suggested that the increase “perhaps provides a tentative sign that firms are passing on more of April’s rise in National Insurance Contributions in their selling prices”.
Kris Hamer, director of insight at the British Retail Consortium (BRC), also stated that the new business costs introduced in April by the government were continuing to filter through into the economy.
“Worryingly for consumers, the price of the weekly shop rose once again as food inflation continued its upward trajectory, reaching its highest level since February last year,” he said.
“Since October, retailers have warned that the costs from the Chancellor’s budget could not be fully absorbed and would inevitably lead to higher prices for shoppers. Food inflation is now above 4% and looks set to increase further later in the year. The government must now take action to relieve cost pressures retailers are facing.”
Dr Liliana Danila, Lead Economist at The Food and Drink Federation (FDF), suggested that the figures are also being driven by rising energy and ingredients costs. “Food manufacturing is an energy-intensive sector, and wholesale gas prices are 7.8% higher compared to last May, as UK businesses face significantly higher industrial energy costs compared to other nations,” she said.
“Meanwhile, the price of ingredients has also surged. For example, in the last two years, the price of cocoa has tripled, while wholesale butter prices are also 55% higher than last year. Recent and upcoming regulations are also bringing additional costs to manufacturers.
“With these price increases being coupled with a drop in consumer confidence and a fall in retail sales, food manufacturers have been absorbing rising costs for several years. Recent geopolitical uncertainty is also likely to result in higher pressure on energy and imports, and so unstable manufacturing costs are likely to persist. As a result, we now expect to reach our forecast of 4.8% food and drink inflation for December sooner than anticipated.”
The main rate of inflation in the UK eased to 3.4% last month after a steep fall in air fares and petrol prices offset the spike in food prices. Analysts noted that May’s small decline in the consumer prices index (CPI), down from 3.5% in April, complicates the Bank of England’s interest rates decision on Thursday, although policymakers are still expected to hold interest rates at 4.25%.
NAM Implications:
- Category managers (and some consumers) may have reservations regarding the specifics of ONS output.
- Key has to be consumer perception…
- …and resulting shopping behaviour.
- i.e. on on-shelf pricing is now being impacted by last autumn’s budget tax increases…
- …with more costs to come in Autumn (packaging tax).
- Meanwhile, the government have other worries…
- …and cannot be expected to reduce much of the cost burdens on retailers.
- In which case, any real business growth has to come at the expense of rivals.
- i.e. Relative competitive appeal, written large!
