UK businesses and consumers are grappling with continued food inflation, with chocolate prices surging 17.7% year-on-year in May — the highest increase since records began in 2016, according to the latest Office for National Statistics data. The broader food category saw a 4.4% inflation rate in May, marking the third consecutive month of increases.
The Bank of England’s headline inflation figure held steady at 3.4%, remaining well above the 2% target. While overall inflation remained flat month-on-month, food costs continued to climb, in part due to upstream pressures, including employer National Insurance hikes and minimum wage increases introduced in April.
Cocoa supply challenges are a key driver behind the spike in chocolate prices. Adverse weather and disease in Ghana and Ivory Coast, which together account for over half the world’s cocoa supply, have disrupted production, with little immediate relief expected.
Despite softening in some areas, such as a 5% drop in air fares between April and May, businesses are still dealing with broader cost pass-through. Industry leaders highlight the lingering impact of fiscal policy changes and caution that smaller enterprises may struggle to absorb rising operational costs.
Geopolitical risks also loom large. Tensions in the Strait of Hormuz have the potential to disrupt oil shipments, potentially fuelling further inflation across supply chains and adding pressure on import-reliant sectors. Any escalation could have ripple effects on global shipping and logistics costs.
With interest rates unlikely to drop at the upcoming Bank of England meeting, many UK firms are preparing for a prolonged period of price volatility and cautious consumer spending.