TL;DR - Key Points
- More than 80% of UK food and drink manufacturers plan to pass higher production costs on to consumers, according to Food and Drink Federation survey data published this week.
- Rising costs for energy, transport, packaging, fertiliser and ingredients are being driven in part by the ongoing Middle East conflict.
- UK grocery price inflation eased to 3.1% in the latest Kantar data, down from 3.8%, but manufacturers warn renewed pressure could push prices higher again.
- Ocado and Lidl are the fastest-growing grocers over 12 weeks; Asda is the only major chain to record falling sales.
- The energy price cap rises 13% in July 2026, adding further pressure to household budgets alongside potential food price increases.
Last reviewed: 28 May 2026
What the Data Shows
A survey published this week by the Food and Drink Federation (FDF), the trade body representing UK food and drink manufacturers, found that more than four in five of its members are planning to pass higher input costs through to customers. The finding comes after a period in which grocery price inflation had appeared to be easing, and raises the prospect of a fresh wave of food price increases on UK supermarket shelves.
The cost pressures identified by manufacturers span multiple parts of the supply chain: energy costs for production and cold storage, transport and logistics, packaging materials, fertiliser prices for agricultural inputs, and raw ingredient costs. Several of these cost categories have been directly affected by the Middle East conflict, which has disrupted global shipping routes and pushed up energy wholesale prices.
The Current Grocery Inflation Picture
The latest grocery market data from Kantar shows that UK grocery price inflation stood at 3.1% in the four weeks to mid-May 2026, down from 3.8% in the previous period. Overall take-home grocery sales rose 1.5% over the same four weeks, compared with 0.9% in the prior period. Over 12 weeks, grocery sales were up 2.3%.
Grey skies and below-average temperatures in early May dampened sales of summer seasonal lines such as barbecue food, soft drinks and salad. The underlying sales trend is therefore somewhat stronger than headline figures suggest.
Supermarket Performance: 12-Week Sales Growth
| Retailer | 12-week sales growth |
|---|---|
| Ocado | +10.2% |
| M&S Food | +9.3% |
| Lidl | +8.8% |
| Tesco | +3.2% |
| Sainsbury's | +3.1% |
| Morrisons | +1.3% |
| Aldi | +0.6% |
| Asda | -3.0% |
Ocado and Lidl lead on 12-week growth, continuing a trend that has persisted through much of the current cost-of-living cycle. M&S Food's strong performance reflects continued growth in its premium convenience and ready-meal categories. Asda is the only major grocery chain to record negative sales growth over 12 weeks, continuing a period of operational difficulty.
Why Costs Are Rising Again
The Food and Drink Federation points to several interconnected cost drivers. Energy costs for food manufacturing facilities and cold chain logistics have risen as global wholesale gas and electricity prices have increased, driven in part by Middle East tensions affecting supply routes.
Transport and logistics costs have risen as a result of higher fuel prices and shipping disruption. Packaging costs have increased as petrochemical feedstock prices have risen alongside oil prices. Fertiliser prices, which affect the cost of agricultural raw materials, have also been elevated, with the conflict affecting production and export capacity from certain producing regions.
The cumulative effect is that manufacturers face simultaneous pressure across multiple cost lines, reducing the ability to absorb increases internally without passing at least a portion on to retailers and ultimately consumers.
The Broader Context: Energy Bills and Household Budgets
The potential return of food price inflation comes at a point when household budgets are already under pressure. The Ofgem energy price cap is set to rise 13% in July 2026, taking the average annual bill from approximately £1,641 to £1,862. Cornwall Insight has indicated that a further increase may follow in October.
The combination of higher food prices and higher energy bills represents a renewed squeeze on disposable income, particularly for lower-income households who spend a higher proportion of their budget on food and energy. The Office for National Statistics tracks food price inflation monthly as part of the Consumer Prices Index; the next ONS CPI release will be the key indicator of whether manufacturer cost pressures are feeding through to retail prices.
The Import Loophole Question
Separately, several major UK retailers including Marks and Spencer, Primark, Next and Argos have called on the government to close the de minimis import loophole. Under current rules, goods valued at £135 or less imported directly from overseas warehouses can enter the UK without paying VAT, giving overseas competitors a structural pricing advantage over domestic retailers who charge VAT on equivalent goods.
Frequently Asked Questions
Why are food prices rising again in 2026?
Food and drink manufacturers are facing higher costs across energy, transport, packaging, fertiliser and raw ingredients. A significant factor is the ongoing Middle East conflict, which has disrupted global supply chains and pushed up energy and shipping costs. More than 80% of manufacturers surveyed by the Food and Drink Federation say they plan to pass these costs on to consumers.
How much has grocery inflation fallen?
According to Kantar data, UK grocery price inflation eased to 3.1% in the four weeks to mid-May 2026, down from 3.8% in the previous period. However, the FDF survey suggests this easing may be temporary if manufacturer cost pressures continue to build.
Which supermarkets are growing fastest?
Ocado recorded the strongest 12-week sales growth at 10.2%, followed by M&S Food at 9.3% and Lidl at 8.8%. Asda was the only major chain to record falling sales, down 3.0% over 12 weeks.
How does the energy price cap affect food prices?
Higher energy costs affect food manufacturers directly through the cost of running production facilities and cold chain logistics. The 13% energy price cap rise in July 2026 adds to existing pressure on manufacturer margins and may accelerate the pass-through of costs to retail prices.
What is the de minimis import loophole?
Under current UK rules, imported goods valued at £135 or less can enter the country without VAT being charged at the point of import. Several major UK retailers argue this gives overseas sellers an unfair pricing advantage over domestic businesses that charge VAT on equivalent goods.
When will ONS publish the next food price inflation data?
The Office for National Statistics publishes Consumer Prices Index data monthly, typically around the middle of the following month. The next CPI release will provide the most authoritative measure of whether current manufacturer cost pressures are feeding through to retail grocery prices.
