Businesses and industry groups have warned that food prices in the United Kingdom could rise sharply later this year as the Labour government prepares to press ahead with an overhaul of employment rights and faces scrutiny over the cost of upcoming Budget measures.

The Food and Drink Federation (FDF), which represents companies producing about a quarter of the food and drink sold in the UK, said food and non-alcoholic drink inflation could reach 5.7 percent by the end of 2025. The federation attributed the rise in part to domestic policy measures including an increase in national insurance contributions and a new packaging tax, and said companies were increasingly passing costs to consumers after having absorbed them for several years.

The FDF’s analysis, covering January 2020 to July 2025, found that prices for food and non-alcoholic drinks rose 37 percent over that period, compared with a 28 percent increase in overall consumer prices. Some products have seen particularly steep gains: sugar was up about 56 percent, whole milk 46 percent and certain cheeses about 31 percent, the group said.

FDF lead economist Liliana Danila said that while spikes in energy and raw ingredient costs had stabilised, “today’s prices are steeper than anything in recent decades” and the current inflationary pressure was increasingly the result of “the financial impact of domestic policies, now trickling down to supermarket shelves.” FDF chief executive Karen Betts said the UK had been an “outlier” among comparable European economies, with food inflation outpacing recent rises seen in France, Germany and Spain.

Retailers warned of knock-on effects if more costs were added. Giles Hurley, chief executive of Aldi UK and Ireland, said the retail industry had been “really clear that we would strongly advise that any policies and measures that are adopted don’t add costs to business operations because of the risk that they can find their way through to the food sector.” He described pressures on shoppers as “persistent and urgent.”

The warnings come as Labour moves to enact changes to employment law that ministers say will strengthen workers’ rights. Proposals include giving employees entitlement to statutory sick pay from their first day of employment, greater protection from unfair dismissal, and loosening rules governing industrial action. Opposition Conservatives have estimated the set of measures would add roughly £154 to the cost of hiring each worker, on top of what they calculate as an £800 annual cost from the government’s national insurance contribution increase.

Labour leader Keir Starmer has indicated the party will press ahead with its planned reforms despite calls from some businesses and employers to soften the proposals. Ministers say the changes are intended to rebalance rights in the workplace and improve protections for employees.

Industry spokespeople urged the government to take steps to relieve pressure on the sector rather than introduce further levies. The FDF said food manufacturers had absorbed rising production costs in recent years but were increasingly forced to pass costs on to consumers. The federation called on ministers to partner with industry to attract investment, accelerate productivity growth, boost skills and grow exports to help counter inflation and build resilience in UK food and drink manufacturing.

Some business groups and opposition figures have also voiced concern that Chancellor Rachel Reeves may seek additional tax measures in the autumn Budget, a prospect the FDF said would exacerbate the pressure on already stretched households and firms. The government has not published a full costing of any additional Budget measures beyond its existing fiscal statements.

The FDF’s updated inflation forecast and the retailers’ warnings add to a chorus of industry concern as ministers prepare to set out fiscal and labour policy for the coming year. Companies and trade bodies said they would be watching the Budget closely for any measures that could further raise operating costs and feed through to consumer prices at a time when many households remain sensitive to food price inflation.