Outlook For Food And Energy Prices In The Year Ahead

Food and energy costs remain central concerns for households and businesses because they influence everything from wages to margins to day to day operating decisions. Inflation is easing compared to the volatility of the last few years, but the picture for the next twelve months is still mixed. Prices appear set to rise more slowly, yet neither category is likely to fall in any meaningful way.

Food price outlook

Food prices surged during the supply chain disruptions of 2021 to 2023 and were pushed higher again by wage pressures, transport costs and global shipping instability. Although the pace of increase has slowed during the past year, prices remain high. Many clients still question why food costs have not dropped as headline inflation falls. The reason is that the underlying conditions that drove those increases have not disappeared. Agriculture, food production, and distribution still face labour shortages, higher input costs, and ongoing uncertainty in global trade routes.

The most likely outcome for the coming year is a gradual easing in the rate of food inflation rather than a reduction in prices. Supermarkets report calmer supply chains and producers appear more willing to absorb cost pressures in order to protect sales volumes. Better harvests in some regions and lower freight costs should also help. These factors together should keep the next year more stable than the recent past.

Energy price outlook

Energy prices have been among the most unpredictable elements of the recent inflation cycle. While the extreme spikes have eased, the underlying global influences remain. The UK is particularly exposed because it relies heavily on imported gas and is tied to international pricing. Global gas markets continue to react to geopolitical tensions, shipping disruptions and variations in European storage levels. These variables explain why energy pricing still carries a degree of uncertainty.

However, the direction for next year looks a little steadier.

What this means for business planning

The next year is unlikely to bring substantial falls in food or energy prices, but the environment should feel less pressured. This increased stability provides an opportunity for better budgeting and more confident forecasting. Hospitality businesses and manufacturers may find it easier to plan pricing strategies, menus and supply arrangements. Broader stability also supports decisions on energy efficiency projects since assumptions about future savings appear more reliable.