UK businesses expect food inflation to climb as high as 7% over the coming year, driven by rising energy costs and ongoing global uncertainty, according to new data from the Bank of England.
The central bank’s latest Decision Maker Panel survey, which gathers insights from finance leaders across British firms, shows companies have raised their inflation expectations for the next 12 months. Businesses now anticipate increasing prices by 3.8%, up from 3.5% in the previous reporting period.
A majority of firms said they plan to pass on higher costs to consumers. Around 64% of respondents indicated they would respond to recent energy price shocks by raising prices over the year ahead.
Separate intelligence gathered by the Bank’s regional agents suggests the conflict in the Middle East is weighing on business confidence. Companies highlighted concerns about the impact on demand, supply chains and input costs, particularly as energy and transport expenses continue to rise.
While most firms reported limited immediate disruption to output, those surveyed warned that inflationary pressures are likely to intensify through 2026. Food prices, in particular, are expected to increase more sharply than previously forecast, potentially reaching between 6% and 7%.
The findings underline growing concern within the UK economy as businesses navigate higher operating costs and an uncertain global backdrop. Rising energy prices remain a key driver, with knock-on effects across sectors, especially food production and distribution.
The survey adds to mounting evidence that inflation risks persist despite earlier expectations of a slowdown, posing a challenge for policymakers as they assess the outlook for interest rates and economic growth.