UK inflation fell to 2.6% in June, but for the food and drink sector the picture remains more cautious than celebratory. While lower fuel prices helped ease overall inflation, industry figures warn that cost pressures have not disappeared, and many businesses are still navigating higher energy, supply chain and input costs.
The Office for National Statistics said the annual rate of CPI fell from 2.8% in May to 2.6% in June, with transport and motor fuel prices helping to bring the headline figure down. Food and non-alcoholic drink inflation also softened, offering some relief for households and the wider hospitality sector.
James Burgess, Head of Commercial at Atradius, said: “The relief of a dip in inflation is likely to be short-lived. Bank Rate remains at 3.75%, energy bills rose sharply in July, and volatile oil prices could push inflation back up again.”
He added: “Cost pressures have eased thanks to lower fuel costs, but they have not disappeared. Managing liquidity and customer credit risk will be vital for resilience.”
For food and drink manufacturers, the latest figures offer some reassurance, but not a sense that the pressure is over. Dr Liliana Danila, Chief Economist at the Food and Drink Federation, said: “It’s positive to see food and drink manufacturers keeping food prices stable despite rising input costs.”
She added that disruption has become “the new norm” for the food system, and said the new Prime Minister must work with industry to strengthen food security and resilience.
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Emeritus Professor Joe Nellis, economic adviser at MHA, said the easing in inflation was “welcome news” for ministers as they set out their policy agenda, but warned there was “no room for complacency”. He said weaker demand was helping to suppress price growth, meaning falling inflation may reflect a sluggish economy as much as improving conditions.
Felix Feather, Economist at Aberdeen Investments, said June’s inflation data gave policymakers “some welcome relief”, but warned that the improvement could be temporary. He said lower petrol and diesel prices helped bring inflation down, but expected energy costs to push prices higher again later in the year.
For food and drink businesses, the June figures point to a more stable backdrop than earlier in the year, but not yet a genuine turning point. With energy, wages and supply chain pressures still in the mix, many operators are likely to remain focused on managing margins rather than planning for any major recovery in trading conditions.
