Food price inflation in the UK accelerated for the fifth consecutive month in August, reaching its fastest pace since early last year, according to new data from the Office for National Statistics (ONS).
The cost of food and non-alcoholic drinks rose by 5.1% year-on-year, driven by sharp increases in staples such as beef, butter, milk, and chocolate. Beef and veal prices climbed nearly 25%, butter rose by 19%, and chocolate jumped 15.4%. The ONS said the surge marked the highest food inflation rate in 19 months.
Despite the rise in grocery costs, slower growth in other areas, including air fares, meant overall UK inflation remained unchanged at 3.8% in August, the same as July. This level remains well above the Bank of England’s 2% target.
Economists attributed the continued rise in food bills partly to businesses passing on higher costs linked to government policy, including last year’s increases in the minimum wage and employers’ National Insurance Contributions (NIC). “Since April, the rise in inflation has been driven largely by domestic policy choices,” said Yael Selfin, chief economist at KPMG UK. “These higher costs have been passed on by businesses to consumers, feeding through into higher headline inflation.”
Chancellor Rachel Reeves acknowledged the pressure on households, saying families were “finding it tough” and that “for many the economy feels stuck.” She pledged to prioritise measures to bring down costs when she delivers the government’s Budget on 26 November.
The increases have been felt directly by small businesses. Tom Egan, co-founder of Coosh Bakery in Nottingham, said butter and chocolate price spikes had hit his operations hard. Cocoa costs from suppliers have more than doubled in recent months due to poor harvests in Ghana and other producing nations, while butter prices have surged amid tighter milk supplies. The rise in NICs, he added, had also limited the bakery’s ability to invest in new equipment.
The British Retail Consortium (BRC) warned that food prices are rising faster than wages, which grew 4.7% between May and July. “With food inflation now outpacing wages, many families will be struggling with the rising cost of living,” said Kris Hamer, director of insight at the BRC.
International comparisons show the UK as an outlier. Inflation in France stood at just 0.8% in August, while Germany recorded 2.1%.
With inflation stuck at 3.8%, analysts expect the Bank of England to hold interest rates at 4% when it meets on Thursday, having already cut rates five times since last August. The Bank forecasts inflation will peak at 4% in September, before easing in the months ahead.
Capital Economics said it expects inflation to fall in line with rates in the US and eurozone next year, paving the way for rate cuts to 3% by the end of 2026.
