IN Brief:
- FDF has raised its December 2026 food and non-alcoholic drink inflation forecast from 3.2% to 9% to 10%.
- The revision is tied to disruption in oil, gas, fertiliser, and freight flows linked to the effective closure of the Strait of Hormuz.
- The outlook puts renewed pressure on processors, growers, and exporters even before recent energy costs have fully fed through contracts and shelf prices.
The Food and Drink Federation has sharply raised its year-end food inflation forecast, saying food and non-alcoholic drink inflation could reach 9% to 10% by December 2026 rather than the 3.2% it projected last autumn. The federation said the revision reflects the effect of conflict in Iran on energy infrastructure and shipping routes, particularly the effective closure of the Strait of Hormuz, and assumes cargo traffic resumes within two to three weeks while most oil, gas, and fertiliser assets return to normal within a year.
The change rests on a straightforward problem for manufacturers: energy costs do not sit at the edge of the process, they run through it. Cooking, chilling, freezing, compressed air, packaging conversion, and transport all become more expensive when oil and gas markets are disrupted. FDF said larger businesses with hedged contracts are bracing for higher renewal costs, while smaller producers buying power on the spot market are already facing sharper increases.
Those pressures are being compounded rather than replaced by logistics disruption. FDF said rising transportation costs and delays across shipping routes are hitting at the same time as exporters of cereals, chocolate, cheese, and biscuits pause or cancel shipments to Middle Eastern markets. That combination of higher inputs and lost sales makes the inflation outlook more difficult than a simple energy spike, because it weakens both cost recovery and demand visibility at once.
The pressure is also moving back up the chain. FDF said red diesel prices have surged since the conflict began, while fertiliser supply remains tight and is a concern for livestock producers in particular. Greenhouse growers are also exposed to volatile energy costs, which means the next inflationary wave does not stop at manufacturing overheads but risks feeding into raw material availability and farmgate pricing as well.
The warning lands after a period in which food inflation had been easing. Official data showed food and non-alcoholic beverage prices rose 3.3% in the year to February, while grocery inflation stood at 4.3% in March. FDF’s revised year-end view therefore points less to a continuation of disinflation than to a reversal driven by energy, freight, and fertiliser markets.
The federation is calling for food and drink to be included in the British Industrial Competitiveness Scheme and for a slower pace of further cost-adding regulation, including changes linked to EPR, DRS, and the proposed Nutrient Profiling Model. Whether ministers move on those requests or not, the revised forecast suggests manufacturers are now preparing for a year in which contract timing, sourcing resilience, and energy exposure are once again moving to the centre of operational planning.
