The impact of the Spring Statement & inflation
on your food purchasing
The UK Spring Statement 2025 builds upon measures introduced in the 2024 Budget and together those fiscal choices carry significant implications for the food sector – especially around food prices, food supply chain, domestic production, and long-term food security.
Combined with the latest CPI figures, showing food inflation rising to 5.1% in August 2025 (according to ONS data released on 17 September), and higher than the overall rate of CPI inflation at 3.8%, the food you are purchasing may well cost you ever more over the coming months. Especially if you’re not supported by a food procurement team expertly analysing on your behalf!
allmanhall’s Managing Director, Oliver Hall, and Mike Meek, Procurement & Sustainability Director, give you the pertinent facts for informed decision making…
Certainties will increase costs
Oliver explains that “Policy changes following the autumn budget will particularly impact food businesses. These include the rate and threshold of employer National Insurance Contributions (NICs) and a 6.7% increase in the National Living Wage. Many food service suppliers have responded by implementing cost-to-serve increases from 01 April, which are above and beyond changes to product prices.”
From a farming and production perspective, changes to farm inheritance tax have made national headlines and continue to raise concerns about the viability of family-owned farms. Without exemptions or additional support, there is a risk of reduced domestic production, increased farm consolidation, and greater reliance on food imports, all of which weaken the UK’s food security amid global supply chain uncertainty.
However, Mike is keen to point out that “Farmers are not only facing the issue of inheritance tax. The abrupt closure of the Sustainable Farming Initiative (SFI) to new claimants could have the most profound impact on UK food production. The SFI scheme, which pays farmers to manage their land in an environmentally sustainable way, is a vital source of income, and its abrupt closure will create anxiety and uncertainty for those who miss out.”
Looking beyond the local food supply chain from our farmers, for those food suppliers importing goods from Europe and beyond, new border procedures will bring additional customs checks for imported goods – increasing both time and cost for businesses heavily reliant on global supply chains. From March 31, 2025, all goods imported into Great Britain from the EU must now be covered by a safety and security declaration (also known as an Entry Summary Declaration or ENS), a change that aligns EU imports with existing protocols for non-EU countries.
Impact of cost increases on the food industry
While these cost increases are not exclusive to the food industry, food businesses are expected to be hit particularly hard. With high employment rates, extensive use of packaging, and dependency on imports, the sector faces unique challenges. The Institute of Grocery Distribution (IGD) anticipates that around 80% of these additional costs will be passed on to consumers.
These cost factors are exacerbated by universal influences such as geopolitical tension, weather conditions, trade barriers, and plant and animal diseases, which can all disrupt supply.
Unpredictable factors impacting food prices
One of the primary challenges in forecasting food prices is the ongoing impact of climate change. Changes in traditional weather patterns significantly affect crops and food systems. Extreme weather events, droughts, and shifts in growing seasons make it difficult to predict yields, contributing to price volatility. As Mike explains, “We saw this variability with the 2019 UK cereal harvest, which was the highest this century, whilst the 2020 harvest was the second lowest.”
Additionally, unpredictable factors such as the spread of plant or animal diseases make it even more challenging. Between December 2024 and March 2025, two hundred reported poultry outbreaks of avian influenza led to preventative measures like trade restrictions and widespread culling of poultry, resulting in increased production costs and product shortages. This has led to a 5% reduction in the UK flock and significant price pressure for poultry meat and eggs. Chicken prices are currently 7.3% higher than this time last year.
Geopolitical uncertainties currently abound, including the unresolved war in Ukraine (wheat prices have risen nearly 8% year on year, as both the nations involved are key global exporters), and potential changes to US tariff policies.
The extension of the Energy Profits Levy continues to affect the wider economy. While not targeted at food producers directly, higher energy costs – especially for cold-chain logistics and food processing – may further pressure profit margins and lead to price increases for energy-intensive foods such as dairy, frozen, and chilled goods.
On a more positive note, the Spring Statement reiterates a 40% business rates relief for eligible retail, hospitality, and foodservice businesses in 2025-26 (up to £110,000). While this offers short-term relief for some food operators, it does not address upstream costs in food production or distribution, limiting its broader impact on overall food price stability.
Looking ahead: food price projections
The UK Spring Statement 2025 reaffirms policies from the Autumn Budget that will likely increase food production costs and, consequently, food prices. Without strategic reforms or protections for domestic agriculture, the UK may face long-term risks to its food security. While some businesses may benefit from short-term reliefs, more comprehensive support for producers and supply chains is needed to ensure affordable and sustainable access to food in the years ahead.
Faced with a number of unique challenges, the food sector will be impacted by a larger proportion than most of the estimated £5billion total increased costs across the retail sector. Consequently, household food inflation is now forecasted to rise to around 6% by the end of 2025 (5.7% according to the Food & Drink Federation). This estimate does not account for unpredictable weather, disease outbreaks, or potential changes in international trade policies. Mike concludes that “Should any of these factors worsen, the inflation rate could be even higher, but we will of course keep you informed as the year progresses.”
In the meantime, allmanhall will continue negotiating with suppliers to provide beneficial outcomes, offering guidance on alternative products and range management, and proactively mitigating risks on behalf of our clients.