Food Inflation Remains A Political Risk
Food prices are on track to be 50% higher in November than they were at the start of the cost of living crisis in 2021, according to research from the Energy and Climate Intelligence Unit. The finding suggests that household pressure is likely to remain a central economic and political issue through 2026.
The research points to climate and energy shocks as key forces behind the acceleration in food costs. According to the thinktank, the pace of food price growth has almost quadrupled, with prices rising in five years at a similar rate to the previous two decades combined.
Low Income Families Face The Sharpest Strain
Anna Taylor, executive director of the Food Foundation, warned that rapid food price increases leave low income families with very little room to adjust. When essentials become more expensive, households already under pressure may have no option but to reduce the quantity or quality of food they buy.
The social cost can be significant. Taylor said higher prices can lead to skipped meals, child hunger and rising diet related illness, which can also affect parents’ ability to work and add pressure to the NHS.
Energy And Climate Shocks Drive Prices
The ECIU said many food products have become sharply more expensive because they are exposed to volatile oil and gas prices, synthetic fertiliser costs and climate impacts such as droughts, floods and heatwaves. These pressures affect both UK production and key import regions.
Foods including pasta, frozen vegetables, chocolate and eggs are all at least 50% more expensive than five years ago. Beef prices have risen 64%, while olive oil has more than doubled, showing how supply disruption and production costs have spread across everyday household staples.
Household Bills Continue To Rise
The report said these forces increased household food bills by an average of 605 pounds over 2022 and 2023. More recently, five climate affected products, butter, milk, beef, chocolate and coffee, have been responsible for much of the continued pressure on food inflation.
For consumers, the pressure is especially difficult because food is a non discretionary expense. Higher prices can quickly reduce disposable income, weaken retail demand and increase pressure on policymakers to respond through welfare, tax or competition measures.
The War Adds Another Inflation Threat
Experts warned that the war in the Middle East could drive inflation higher by pushing up oil and gas prices. The cost of living crisis had already been intensified by the Covid pandemic and Russia’s invasion of Ukraine, and the latest energy shock threatens to prolong the strain.
The Bank of England has said food inflation is expected to rise to 7% by the end of the year, driven by higher costs for fertiliser, energy and transport. For markets, that raises the risk that inflation remains stickier than expected, limiting the room for interest rate cuts.
Climate Risks Could Intensify The Pressure
Chris Jaccarini, food and farming analyst at the ECIU, said higher oil and gas prices linked to the Middle East war are set to push shopping bills higher. He also noted that scientists expect 2027 to be the hottest year on record, with climate change combining with the El Niño effect.
The ECIU added that three of England’s worst harvests on record have occurred in the past five years. Adjusted for average wages, food prices have risen 11% since the start of the cost of living crisis, adding to wage adjusted increases in other essential costs such as energy and water. For investors and policymakers, the message is clear: food inflation is no longer a short term shock, but a structural risk tied to energy, climate and household resilience.
