The report highlights a fragile economic outlook, with recent hopes of stabilisation undermined by renewed global disruption, including US action in Venezuela and increasing geopolitical unease surrounding Greenland and NATO.
James Walton, IGD chief economist, said: “The UK food system has faced ongoing disruptions, from geopolitical turbulence to a stagnant UK economy and nearly two decades of flat household prosperity. Despite this, the industry still has significant potential, provided it is futureproofed. Food and drink businesses cannot wait; they need to move faster to build the future they want.”
IGD warns that this instability is adding fresh layers of complexity for the food system, impacting both business decision making and consumer confidence. Five key findings from the report include:
- Geopolitical turbulence: IGD urges food and drink businesses to review their supply chain vulnerability and, where possible, look for ways to re-shore or near-shore supply.
- Low growth outlook: Real GDP growth for 2025 is likely to be 1.2% to 1.5%, with little improvement in 2026.
- Persistent inflation: IGD expects that food and drink inflation will only ease slowly, averaging 3.8% over 2026, compared to 4.2% for 2025.
- Consumers tightening budgets: Thirty percent of shoppers plan to cut grocery spending and 42% expect to cut back on eating out spend in the next few months.
- Labour shortages and the future workforce: IGD notes that ‘transforming’ supply chains will also require reshaping the workforce and attracting new skills.