The Institute for Grocery Research’s warning that food inflation could reach 8% by the summer is no longer being treated as a fringe forecast. It sits at the centre of a growing consensus among economists, retailers and government analysts that the Iran war’s supply chain damage is moving through the food system faster than the public has been told to expect.
Fertiliser prices have risen sharply since February 28, driven by the same energy cost pressures that are pushing up gas and oil prices. Since fertiliser production is enormously energy-intensive, the transmission from oil shock to food price spike is faster and more direct than many consumers understand.
Shipping costs have also increased, not only for food but for every category of goods that moves through routes affected by the Hormuz closure and the threat of Houthi activity in the Red Sea. The rerouting of container ships around the Cape of Good Hope adds time, fuel and cost that ultimately lands in supermarket prices.
Morrisons CEO Rami Baitiéh acknowledged the pressure directly this week: “We know it’s tough for customers right now and we’re doing everything we can to offer them better value and give them more reasons to shop at Morrisons. We are watching current International events closely, alert to the impacts on consumer confidence and supply chains, and we will continue to do what we can to mitigate effects on our customers.”
Rachel Reeves is preparing to meet supermarket bosses and food regulators to assess the wider impact on prices across the supply chain, a consultation that signals government awareness without yet committing to any specific intervention. The Chancellor has made clear that “learn the lessons of the past” is her guiding principle, referencing the 2022 energy support package where the top third of households received more than a third of the total support.
The food inflation trajectory creates a political problem that is distinct from energy prices. People notice immediately when food shopping gets more expensive, and unlike energy bills, there is no Ofgem cap equivalent to provide even temporary protection.