It remains the lowest rate seen for food inflation since December 2021, but the British Retail Consortium has warned that there are “pressures on the horizon” which could see food prices rise again.
Helen Dickinson, chief executive of the British Retail Consortium, said: “With food inflation bottoming out at 1.8%, and many price pressures on the horizon, shop price deflation is likely to become a thing of the past.
“As retailers battle the £7bn of increased costs in 2025 from the budget, including higher employer national insurance, national living wage and new packaging levies, there is little hope of prices going anywhere but up.”
Modelling by the British Retail Consortium and chief financial officers in the industry suggest food prices will rise by an average of 4.2% in the latter half of the year, while non-food items will return to inflation.
Dickinson said: “Government can still take steps to mitigate these price pressures, and it must ensure that its proposed reforms to business rates do not result in any stores paying more in rates than they do already.”
Food prices rising will be particularly impactful for low-income households, who spend a greater proportion of their income on essentials.
The Resolution Foundation has found that poorer families are most affected by surging food prices as they spend a greater share of their family budgets on food – around 14% of their income, compared to 9% for the highest-income households.
It also comes after energy bills increased in January and will do so again in April, by which point energy bills for a typical household will be around £600 higher a year than they were in February 2022.
Retailers and energy companies have come under scrutiny for their large profits against the backdrop of the cost of living crisis.
The Food Foundation previously found that supermarkets have maintained “stable” and “healthy” profits often worth tens if not hundreds of millions despite inflationary pressures. Meanwhile, supermarket CEOs are reportedly receiving annual salaries of between £855,000 and nearly £10m.
Alice English, project officer at the Food Foundation said: ”Further food price rises are a real concern and would be detrimental for a large number of households, given our food insecurity data shows 7.2 million adults lived in households that experienced food insecurity in June 2024 when inflation [for food and non-alcoholic beverages] was at 1.5%.
“Although it’s true businesses face an increased wage bill in 2025, the evidence suggests that despite the volatility of the last few years, supermarket profits have, for the most part, remained stable and many supermarket executives have received healthy pay-outs.”
Campaigners have consistently called out profiteering of large companies during the cost of living crisis.
According to general secretary of Unite the Union Sharon Graham, “while workers have been hit with the biggest fall in real wages and living standards in generations, corporations have racked up hundreds of billions in profits”.
English added: “The forthcoming rise in the national living wage is welcome and overdue. Policymakers should also act now to ensure that benefit levels take into account the cost of affording a healthy diet and expand existing nutritional safety net schemes such as healthy start and free school meals to ensure that low-income households can afford and access nutritious food.”
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