Labour costs and tariff wars ‘likely to drive up foodservice prices’

Rising UK labour costs and global tariff wars could lead to a surge in foodservice price inflation in the next few months, analysts have warned.

Businesses have been advised to stay “laser-focused” on cost management and margins to navigate the potential challenges ahead.

Foodservice price inflation has eased in recent months, with the CGA Prestige Foodservice Price Index dropping by a marginal 0.1 point from January 2025.

Year-on-year inflation held steady at 1.8% in February, while month-on-month inflation saw a slight decrease of 0.1%.

However, six out of 10 of the categories tracked by the index experienced month-on-month inflation in February and only one category showed year-on-year deflation.

The highest year-on-year inflation was observed in oils and fats at 5.7% and coffee, tea and cocoa at 6.8%.

Cocoa and coffee prices remain at nearly double the average price compared to 2023.

Meat and poultry prices are also under significant upward pressure with beef prices continuing to trade at record highs, and price rises in chicken being seen due to the avian flu outbreak in Poland.

Analysts said the full impact of US tariffs on prices has yet to materialise and the situation remains uncertain. President Trump yesterday announced a 90-day pause for countries hit by higher tariffs but increased the tariff on goods from China to 125%.

The increase in the National Minimum Wage and National Insurance Contributions (NICs) in April could also push up prices in the supply chain as producers and wholesalers adjust to increased overheads and analysts have warned businesses to remain “vigilant” for future price increases.

Shaun Allen, chief executive of Prestige Purchasing, said businesses were “likely to see a resurgence of inflation in the coming months”.

“Operators should ensure they have robust procurement strategies and mitigation plans in place where possible to navigate the challenges ahead,” he said.

Reuben Pullan, senior insight consultant at CGA by NIQ, said: “The inflationary waters in foodservice have been calm lately, but there are several major causes for concern. Increases in NICs will hit hospitality operators’ margins and are also likely to drive up some prices, while tariff wars will inevitably cause more collateral damage across the sector. Confidence among both consumers and leaders remains hesitant, and businesses will need to stay laser-focused on cost management and margins in the months ahead.”

Read more: Are price increases the only solution to April’s tax raid?

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