Food industry bosses have called for the government to intervene with emergency measures to help manufacturers facing a massive inflationary shock due to the war in Iran.
Today the FDF released a revised forecast predicting food inflation could rise at more than triple the rate it was predicting in September. Food bills are now expected to soar by up to 10% by Christmas if the Strait of Hormuz opens “within two to three weeks” and energy production in the Middle East returns to normal within a year.
However, with no guarantees of that happening and with some analysts suggesting the supply chain will face a much longer hit, it acknowledged that the blow to food companies could be much higher. They faced facing soaring fuel costs, product shortages and rising commodity prices, analysts suggested.
The FDF said it was now calling on ministers to intervene to “soften the impact” on manufacturers and lessen the risk of eye-watering price rises.
Its move comes with Chancellor Rachel Reeves due to meet supermarket bosses later today to discuss the threat posed by potential price rises and shortages of household essentials amid the surge in energy, fuel and fertiliser costs. They are also likely to call for the govenrment to step in to try to reduce costs on industry of incoming regulation..
The FDF urged the government to delay any new regulation, including scrapping the proposed shift to the new nutrient profiling model (NPM), which The Grocer revealed last week is due to go ahead despite crisis talks having been held with Defra and the DHSC.
The federation has also stepped up its ongoing campaign for food and drink to be included in the British Industrial Competitiveness Scheme, so it could qualify for offers of support with industrial electricity bills. The sector is currently ineligible as it is not considered ‘Advanced manufacturing’.
The FDF said the food industry had continued to be swamped with new costs, from the packaging systems changes of extended producer responsibility to the proposed rollout of the deposit return scheme in October next year. Industry could not cope with more pressure given the backdrop of the war, it added.
It also urged ministers to consider whether a number of outdated regulations could be binned to ease the pressures faced by the sector and help tackle inflation.
The FDF previously forecast the rate of food inflation would gradually ease in 2026, ending the year at around 3%.
However, it said the closure of the Strait of Hormuz and impact on oil and gas facilities in the Middle East due to the conflict in Iran meant it had no option but to uprate the forecast.
It highlighted soaring transportation costs, driven by higher oil prices, and by ongoing delays and disruption across global shipping routes.
Exporters of products in the Middle East – such as cereals, chocolate, cheese and biscuits – had been forced to pause or cancel shipments to the region already, said Liliana Danila, chief economist at the FDF.
Danila called the current situation “unprecedented and hard to predict” but added that despite the best efforts of companies “it’s clear that food inflation is going to rise in the months ahead”.
The FDF’s call for help comes after CEO Karen Betts criticised ministers last week for their lack of support for the industry, describing its partnership with the sector as “threadbare”.
Supermarket chiefs are also calling on the government to step in with a meeting at Number 11 between Reeves and the bosses of Sainsbury’s, Tesco and Morrisons.
A Treasury source said it was “very much a fact-finding, open discussion” but yesterday BRC chief executive Helen Dickinson said supermarket bosses had called for the chacellor to step in to reduce costs on the sector.
Writing in The Times she said government policies such as increases in National Insurance, the national living wage and EPR had added huge costs to retailers and also singled out the NPM as an area where the the government could step in.
“The government’s nutrient profiling model will force food retailers and manufacturers to once again reformulate tens of thousands of products to fit new definitions of HFSS,” she said.
Meanwhile, the government was “forcing supermarkets to fork out billions of pounds a year for new recycling schemes and increasing business rates on larger stores,” she said.
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