By Aimee Look
Food inflation in the U.K. could triple by the end of the year, a food-and-drinks trade body said, citing spillover from war in the Middle East.
By the end of the year, the U.K.'s Food and Drink Federation expects food inflation to reach 9% to 10%. It previously forecast that the inflation rate would ease this year, ending around 3.2%, the federation said.
The federation, which represents thousands of food and non-alcoholic drink manufacturers including Oreo-maker Mondelez International and Kitkat-producer Nestle U.K., said its sector is particularly exposed to supply disruptions in the Strait of Hormuz and energy costs.
Medium and larger-sized producers are bracing for rises in energy prices as contracts are up for renewal, while smaller producers that buy on the spot are already feeling the strain, the federation said.
U.K. exporters to the Middle East have already had to pause or cancel shipments to the region, losing sales and adding further uncertainty.
"The current situation is unprecedented and hard to predict, however given the scale and speed of these cost increases, and despite companies' best efforts not to pass price increases on, it's clear that food inflation is going to rise in the months ahead," Liliana Danila, the federation's Chief Economist said in a statement.
Food and non-alcoholic drink inflation forecasts are based on the assumption that the Straits of Hormuz will reopen in the next few weeks, and that energy production in the region will return to normal within the next year, the group said.
Food inflation fell to 3.4% year on year in March, compared with growth of 3.5% in February, according to data from the British Retail Consortium.
Overall inflation in the U.K. is expected to rise between 3% and 3.5% in coming quarters, the Bank of England said last month.
Write to Aimee Look at aimee.look@wsj.com
(END) Dow Jones Newswires
04-01-26 0554ET
