Businesses and industry groups have warned that further costs introduced at the autumn Budget could push food bills higher, after the Food and Drink Federation (FDF) said food and non‑alcoholic drink inflation could reach 5.7% by the end of the year.
The FDF and supermarket executives linked the projected rise to a combination of domestic policy measures, including a recent increase in national insurance contributions and a new packaging tax, and said manufacturers — which make about a quarter of the food and drink sold in the UK — were increasingly passing higher costs on to consumers.
The warnings came as the government moved to press ahead with an employment rights overhaul that Labour ministers say will strengthen protections for workers. The package, backed by Prime Minister Keir Starmer and his Cabinet, would give workers statutory sick pay from their first day in a job, expand protection from unfair dismissal and loosen rules on industrial action, according to ministers and party statements.
Conservative critics say the labour market changes will increase costs for employers. The party has estimated the measures would add about £154 to the cost of hiring each worker, on top of what it says is an £800 annual increase tied to the national insurance rise. Labour ministers and allies have defended the proposals as necessary to modernise workplace protections.
The FDF said food and drink inflation had been "steeper than anything in recent decades." Its analysis, covering January 2020 through July 2025, found prices for food and non‑alcoholic drinks rose 37% in that period, compared with a 28% rise in overall consumer prices. Some products have seen particularly sharp increases: sugar rose 56%, whole milk 46% and cheese 31%, the federation said.
"Looking at the longer‑term picture, today's prices are steeper than anything in recent decades," Liliana Danila, the FDF's lead economist, said in a briefing. She added that spikes in energy and raw ingredient costs had largely stabilised and that the current inflationary pressure was increasingly being driven by the "financial impact of domestic policies, now trickling down to supermarket shelves."
FDF chief executive Karen Betts said the UK had become an "outlier" among comparable European economies. The federation pointed to recent months in which UK food inflation exceeded rates in France, Germany and Spain, indicating a stronger domestic policy influence in the UK market.
Giles Hurley, chief executive of Aldi UK and Ireland, described pressures on shoppers as "persistent and urgent" and warned of "ripple effects" if additional costs were placed on businesses. "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 said.
Industry executives told ministers that producers had absorbed rising production costs in recent years but that many firms were now unable to continue doing so without passing some of those costs to consumers. The FDF said it had previously forecast food and drink inflation at 4.9% in September and 4.8% in December, and its revised forecast to 5.7% reflects the latest economic signals and policy changes.
The federation called on government to work with the sector to attract investment, accelerate productivity growth, improve skills and expand exports, arguing such measures would help counter inflation and bolster the resilience of UK food and drink manufacturing.
Labour ministers have signalled they will press ahead with the employment rights package despite warnings from businesses and opposition parties. Supporters of the reforms say they will strengthen protections for lower‑paid and insecure workers and address century‑old imbalances in employment law. Opponents say the new obligations risk increasing costs for firms, particularly small and medium‑sized enterprises that operate on tight margins.
The debate over the scale and timing of any further tax or regulatory changes has intensified ahead of the autumn Budget, with business groups and retailers urging the government to avoid measures that would further raise operating costs. The FDF and supermarket executives have highlighted the cumulative effect of successive policy changes, including energy price volatility in previous years, supply‑chain pressures and the latest taxes and employment liabilities.
Ministers and Labour figures said they recognised pressures on households and businesses but argued the package of measures was intended to deliver long‑term gains in fairness and productivity. The Chancellor has indicated that decisions on tax and spending will aim to balance fiscal responsibility with investment in public services and the economy.
Analysts said the immediate effect on prices would depend on how much of the additional costs firms could absorb, the competitive dynamics in retail, and whether the government adopted offsetting measures to support businesses. The FDF urged swift engagement between ministers and industry to explore policies that would help reduce costs and support growth without further destabilising consumer prices.
As the autumn Budget approaches, industry leaders said their principal concern was the pace and layering of policy changes and the potential for knock‑on effects across supply chains that could accelerate consumer price inflation. The FDF said targeted collaboration between government and the food and drink sector was needed to limit further price rises and secure investment for long‑term resilience.