Unexpected Surge: Food Supply Chain Disruptions Drive UK Inflation Higher

Consumer goods prices in the United Kingdom rose by 3.8 percent in the year to July, primarily due to higher food costs. Analysts attribute climate-related shocks in food supply chains, both domestically and internationally, as a significant factor. The Office for National Statistics confirmed on 20 August that inflation has now reached its highest level since January 2024, holding steady at 3.8 percent.

Although this figure is well above the Bank of England’s target of 2 percent, it remains far below the surge that pushed inflation above 10 percent in mid-2023.

Since late 2016, inflation has remained relatively stable, with the only notable dip occurring between September 2020 and May 2021, during the pandemic.

Currently, the strongest pressures are coming from airfares and food prices. Air travel always becomes more costly during the school holidays, but food prices in particular have proven difficult to contain.

The ONS tracks the prices of everyday items, including coffee, orange juice, chocolate, sweets, milk, and beef. It reported that inflation on these goods rose from 4.5 percent in the year to June to 4.9 percent in the year to July, outpacing categories such as clothing and furniture.

The Energy and Climate Intelligence Unit’s (ECIU) land, food and farming analyst, Tom Lancaster, said: “As the UK experiences one of our worst droughts in living memory, the impact of climate change on these figures is clear to see. We can already see the impacts starting to come through in some vegetable prices.”

The role of climate shocks in food production

Experts stress that the impact of extreme weather on food cannot be overlooked. Earlier this month, England’s National Drought Group declared a “nationally significant incident” after weeks of low rainfall combined with high temperatures. Five regions are now officially in drought.

Some vegetables have been brutally hit. Cauliflower prices provide a striking example: wholesale costs have jumped to £2.14 this week, compared with just 89p at the start of August.

The United Kingdom imports close to 40 percent of its food. Domestic crops are under pressure from drought, while floods in Nigeria and wildfires across parts of southern Europe are compounding the challenge.

The ECIU’s Lancaster continued: “The Bank of England stated in a report this month that extreme weather is now one of the main drivers of food price inflation, and that climate-change-related impacts may prevent it coming down as expected towards the end of this year.

“The weather we have seen in the UK this year is not normal, and we are seeing extremes like it globally, with impacts on our food production both here and abroad.

“Climate change is already hitting the British public’s spending power, and the science is clear that, until net-zero emissions is reached, these impacts on food security and prices are only going to escalate, creating more pain for families in the months and years ahead.”

Chancellor Rachel Reeves said: “We have taken the decisions needed to stabilise the public finances, and we’re a long way from the double-digit inflation we saw under the previous government, but there’s more to do to ease the cost of living.

“That’s why we’ve raised the minimum wage, extended the £3 bus fare cap, expanded free school meals to over half a million more children, and are rolling out free breakfast clubs for every child in the country. Through our Plan for Change, we’re going further and faster to put more money in people’s pockets.”

 With these stresses piling up, the Bank of England expects inflation to rise further, potentially peaking at 4 percent in the year to September.

Although the government has introduced measures to ease household spending, workers are still bracing for lower real wages. Businesses are expected to pass on the cost of higher taxes and increased minimum wage rates to consumers, keeping the pressure on prices.