The British Retail Consortium (BRC) has projected a significant increase in food inflation, forecasting it will surpass 4% in the latter half of 2025. This prediction follows a February rise to 2.1%, up from 1.6% in January, according to the latest BRC-NIQ Shop Price Index.
The BRC attributes this anticipated surge to a confluence of rising costs facing businesses. These include escalating geopolitical tensions, the upcoming £7 billion cost increase from the autumn budget (including increased employer National Insurance contributions), the introduction of a “poorly designed” packaging levy in October, and proposed increases in business rates for larger properties from 2026.
BRC CEO Helen Dickinson urged the government to intervene and “mitigate the swathe of costs” impacting the industry. She specifically called for ensuring no shop faces increased business rates under the new proposals and delaying the planned packaging taxes. “If government wants to keep inflation at bay, enable retailers to focus on growth, and help households, it must mitigate the swathe of costs facing the industry,” Dickinson stated.
The February figures reveal ambient food experiencing the largest price increase, up 2.8% year-on-year, exceeding January’s 2.5% and the three-month average of 2.7%. Fresh food inflation also rose to 1.5%, compared to 0.9% in January. Dickinson noted that breakfast staples like butter, cheese, eggs, bread, and cereals have already seen price hikes, with rising global coffee prices potentially exacerbating the situation.
While food prices are climbing, wider shop prices, including non-food items, remained in deflation, down 0.7% year-on-year in February, matching January’s decline.
Mike Watkins, NIQ head of retailer and business insight, anticipates the rising food inflation will lead consumers to increasingly utilize supermarket loyalty programs to manage their budgets. He also suggested that pressure on household finances might lead to reduced spending on non-food items, potentially keeping prices lower in that sector.
