Bakers and other food manufacturers are paying the price of government regulation and policy decisions, according to the Food and Drink Federation (FDF).
The trade body has revised its food and drink inflation forecast and warns inflation could hit 5.7% by the end of the year, up from its previous forecast of 4.8%.
In July, UK food inflation was 4.9%, higher than in France (1.8%), Germany (2.7%), or Spain (2.8%). The FDF claimed this shows UK inflation is being driven by government regulation such as changes to employer National Insurance Contributions and the new Extended Producer Responsibility (EPR) packaging tax.
“UK food price inflation is running persistently high,” said FDF chief executive Karen Betts.
“It’s an outlier against comparable European economies and it’s persisting in the absence of energy or commodity shocks. The costs are such that companies can no longer absorb them and are having to pass at least some of them onto consumers.”
Between July 2020 and July 2025, food and drink prices rose 37%, ahead of the 28% increase in overall UK inflation. Over that period, the price of olive oil soared 118%, while eggs rose 57%, butter 53% and milk 46%, according to Office of National Statistics figures.
Bread prices have risen 30%, below the average price of food and drink inflation. The average price of a white 800g sliced loaf was £1.03 in January 2020 and £1.40 in January 2025.
The FDF pointed out that the commodity and energy price hikes that had been responsible for much of the inflation in the early part of this decade had since eased.
“Inflationary spikes between 2020 and 2023 were driven by geopolitical shocks which created supply chain disruptions and sharp rises in energy and raw ingredients,” explained FDF lead economist Dr Liliana Danila. “With most of these costs now stabilised, this new inflation surge is fuelled by the financial impact of domestic policies, now trickling down to supermarket shelves.”
The FDF is urging the government not to add to the cost of regulation, and has set out action the government can take to support food producers:
- Policies to incentivise investment in the sector, which could include supporting more automation and tech adoption alongside the transition to a higher skilled workforce
- Bearing down on existing cost pressures, such as using the £1.1bn fees for the EPR scheme to boost recycling rates so that producers aren’t hit with higher bills in coming years.
- Ensuring the food and drink industry’s interests are represented as negotiations for a renewed trade agreement with the EU progress.
“As this Autumn’s Budget looms, it’s critical that government does not add further to the already high costs of regulation in our sector,” said Betts.
“We’re calling on government to help us turn this tide by partnering with industry to attract investment, accelerate productivity growth, boost skills, and grow exports across our sector. This will help counter inflation and secure a more resilient future for UK food and drink manufacturing.”
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