Business groups warned on Monday that planned Budget measures and new employment rules risk driving a fresh rise in food prices, as the government prepares to press ahead with an overhaul of workers’ rights.
The Food and Drink Federation (FDF), which represents firms that make about a quarter of the food and drink sold in the UK, said food and non‑alcoholic drink inflation could hit 5.7% by the end of the year. That growth would follow sustained increases in recent years and, the FDF said, is being driven in part by domestic policy changes including higher national insurance contributions and a new packaging tax.
Labour leader Keir Starmer has indicated his government will ignore calls from some business groups to soften planned employment changes, which include extending day‑one statutory sick pay entitlements, broadening protection from unfair dismissal and relaxing some strike‑related restrictions. The Conservative Party has sought to quantify the potential cost to employers, estimating the package would add about £154 for every worker hired, on top of an estimated £800 annual impact from a recent national insurance increase.
The FDF said its latest analysis shows food and non‑alcoholic drink prices rose 37% between January 2020 and July 2025, compared with a 28% rise in overall prices over the same period. Some items have seen especially sharp increases: sugar is up roughly 56%, whole milk about 46% and cheese about 31%, the group said. It noted that earlier forecasts had put inflation at 4.9% in September and 4.8% in December before upward revisions.
FDF lead economist Liliana Danila said that while earlier spikes in energy and raw ingredient costs have eased, current inflationary pressure is increasingly "fuelled by the financial impact of domestic policies, now trickling down to supermarket shelves." Chief executive Karen Betts added that the UK has recently been an "outlier" for food inflation compared with other large European economies such as France, Germany and Spain, arguing that higher domestic cost burdens were a key factor.
Retailers echoed the concerns. Giles Hurley, chief executive of Aldi UK and Ireland, warned of "persistent and urgent" pressures on shoppers and said additional costs imposed on businesses risked producing "ripple effects" for consumers. He said the retail sector has cautioned against policies that would add to operating costs because of the risk those costs could be passed on in higher prices.
The industry group said manufacturers have absorbed rising production costs for several years but are increasingly forced to pass some of those costs to consumers. It highlighted various policy changes it says have added to the burden, including higher employment costs and the introduction of a packaging tax, and urged government to work with industry to attract investment, accelerate productivity growth, boost skills and expand exports.
Analysts and business groups caution that the timing of any cost increases could matter for household budgets. With food accounting for a larger share of spending among low‑income households, further price rises could exert disproportionate pressure on vulnerable consumers and feed into wider inflation figures.
Labour officials have defended the employment changes as measures to strengthen worker protections and improve standards, and have framed the move as part of a broader programme of reform. Conservative critics and some industry leaders argue the additional costs will be borne by employers and, ultimately, shoppers.
The FDF said it will continue to monitor price movements and urged chancellors and ministers to consider the sector’s view ahead of the autumn Budget. The timing of any further tax or regulatory measures will influence how quickly and how significantly companies may adjust prices at the tills, the group added.