What’s next for food prices and the cost of your grocery shop in 2025
Food prices are set to rise by nearly 5% next year as experts warn that food manufacturers and supermarkets will pass on higher costs from the Budget to shoppers.
The past three years have been dominated by the cost of living crisis with the price of eggs, milk, butter chocolate and olive oil soaring.
The price of basic groceries jumped by record levels as farmers, food manufacturers and retailers passed on the higher costs caused by pandemic supply chain disruptions and the energy crisis.
Food inflation peaked at 19.2% in March 2023 but has slowed dramatically to 1.9%, compared with 10.1% in October 2023. This means the rate of price increases has fallen rather than that food is getting cheaper.
Some grocery items are cheaper than a year before including pasta, rice, flour, chicken, frozen fish, cheese and yoghurts. However, most items are still increasing in price – just by smaller amounts than before.
The Bank of England has forecast that it expects food prices to only rise by 1.1% throughout 2025.
However, many retailers and economists believe this is overly optimistic and highlight the Bank previously got its inflation forecasts badly wrong.
Supermarkets including Sainsbury’s, Morrisons and Marks & Spencer have all warned that shoppers will face higher prices because of higher taxes in the Budget.
Meanwhile, Wetherspoons has also said that food and drink prices will have to rise.
Experts at the Institute of Grocery Distribution (IGD) have predicted the cost of food items will rise by up to 4.9% in the next year.
IGD said that while energy and commodity prices will remain broadly stable in 2025, food companies will face significantly increased employment and regulatory costs.
It will mean food inflation could hit anywhere between 2.4% and 4.9%.
Food manufacturers will first face a steep jump in staffing costs in April due to National Insurance and national living wage increases.
The next hit will come in July from rising costs of food imports due to new rules with the European Union.
A third whammy in October will come from a jump in packaging costs due to rules which will shift the costs of recycling and recovery of packaging to businesses.
IGD estimates that the food sector will only be able to absorb between 20% to 40% of these costs meaning the remainder will be passed onto the consumer.
James Walton, chief economist at IGD, said: “We do not see food prices going down in the foreseeable future.
“The rising cost of living, combined with increased employment and regulatory costs, will keep inflation elevated.
“Consumers will undoubtedly look for ways to save money, but the impact of these cost pressures will be felt across the economy.
“For the food sector, the increased financial burdens are becoming harder to absorb, particularly for smaller players in the sector.
“The cumulative impact of multiple changes landing within a short period of time will drive significant cost into all food businesses across the UK.”
How to save money on your supermarket shop
THERE are plenty of ways to save on your grocery shop.
You can look out for yellow or red stickers on products, which show when they’ve been reduced.
If the food is fresh, you’ll have to eat it quickly or freeze it for another time.
Making a list should also save you money, as you’ll be less likely to make any rash purchases when you get to the supermarket.
Going own brand can be one easy way to save hundreds of pounds a year on your food bills too.
This means ditching “finest” or “luxury” products and instead going for “own” or value” type of lines.
Plenty of supermarkets run wonky veg and fruit schemes where you can get cheap prices if they’re misshapen or imperfect.
For example, Lidl runs its Waste Not scheme, offering boxes of 5kg of fruit and vegetables for just £1.50.
If you’re on a low income and a parent, you may be able to get up to £442 a year in Healthy Start vouchers to use at the supermarket too.
Plus, many councils offer supermarket vouchers as part of the Household Support Fund.