LONDON, Sept 9 (Reuters) - British food price inflation is likely to climb to nearly 4% by the end of the year and exceed 6% by the middle of 2027 due to the ongoing impact of the U.S.-Iran war, drought in Europe and the El Niño weather pattern, an industry body said on Wednesday.
The Food and Drink Federation forecast prices for food and non-alcoholic drinks in December would be 3.9% higher than the year before – down sharply from its previous forecast of nearly 10% inflation – but it said prices would continue to rise after and peak at 6.4% in July 2027.
"Food and drink manufacturers have kept food prices as low as possible during the energy shock since the closure of the Strait of Hormuz ... but they can't do this indefinitely," FDF Chief Executive Karen Betts said.
"Persistently higher costs of energy, logistics and packaging, compounded by this summer's extreme heat, mean that food prices will rise this year, and we believe that rise will be sustained into 2027," she added.
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Food inflation is likely to remain significantly above historical averages in the second half of 2027, with a lower peak but longer plateau than forecast in April, the FDF said
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Office for National Statistics data showed that food and drink inflation in July fell to 1.3%, its lowest since August 2024
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The Bank of England views food and energy prices as playing a bigger role in determining households' perceptions of inflation than other categories of goods and services
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Overall consumer price inflation rose to 2.9% in July
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The BoE forecasts that food price inflation will reach 3.5% by December while CPI will rise to 3.1%
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Overall food and drink prices had risen nearly 40% since 2020, the FDF said
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The FDF called on the government to pause plans to restrict the marketing of food classed as unhealthy and said higher payroll taxes and tighter advertising and packaging rules had added £2 billion ($2.7 billion) in costs last year
($1 = 0.7390 pounds)
Reporting by David Milliken, editing by Andy Bruce
Source: Reuters