UK food price inflation could hit nearly 7% in 2027, says industry researcher

LONDON, Sept 16 (Reuters) - British food price inflation will reach up to 3.9% this year and nearly 7% in 2027, driven by Middle East disruption, rising input costs and extreme weather linked to El Nino, a prominent grocery industry researcher said on Wednesday.    

“Food inflation's current weakness will not last.​ Stock buffers and hedging​ have delayed, not removed,​ the pressure building from​ disrupted energy markets​ and extreme weather," James Walton, chief economist at the Institute of Grocery Distribution, said.

• The IGD forecast average UK food inflation at between 2.9% and 3.9% for 2026, rising to 5.6% to 6.6% in 2027 and 5.3% to 6.3% in 2028.

• The Bank of England fears higher food prices drive up overall inflation expectations, which can lead to price pressures becoming embedded in the economy.

• On El Niño it said evidence indicates an extremely severe event, with effects on yields, quality and availability likely to persist well into 2027 and beyond.

• Fruit and vegetables were expected to make the largest contribution to higher food inflation, reflecting their shorter production cycles and high sensitivity to weather.

• The IGD said greater productive capacity, ideally domestically, would help improve resilience across the food system.

• Its forecasts generally echo numbers published earlier this month by industry body the Food and Drink Federation.

• Office for National Statistics data showed that food and drink inflation in July fell to 1.3%, its lowest since August 2024. August data will be published on Wednesday.

• UK grocery price inflation increased to 2.3% over the four weeks to September 6, market researcher Worldpanel by Numerator said on Tuesday.

(Reporting by James DaveyEditing by Tomasz Janowski)