The climate shocks and consumption habits that are driving the UK’s food inflation higher than Europe’s

David Barmes explains the main factors for food price inflation in the UK being above Europe’s, showing that Britain’s sweet tooth and a small number of weather-affected items are responsible for the gap.

UK food inflation has been running 2 percentage points (p.p.) higher than the Euro Area’s on average over the recent three-month period of August to October 2025. The dominant narrative attributes this gap to domestic factors like higher labour and packaging costs, as suggested in the Bank of England’s August Monetary Policy Report. Media stories of strawberry growers being hit by the minimum wage increase and supermarkets having to make ‘difficult decisions’ in response to the rise in national insurance contributions have reinforced the labour costs narrative. Meanwhile, climate-related extreme weather events have been dismissed as an explanation for the food inflation gap because they are assumed to impact the UK and the Euro Area’s food inflation equally.

The evidence, however, points in a different direction. First, as shown in Figure 1, Ireland’s food inflation has closely tracked the UK’s, with a similar gap to the Euro Area aggregate (1.9 p.p. on average over the last three months), which already suggests the drivers in the UK may not be purely domestic.

Figure 1. Gap between food price inflation in the UK and Ireland versus the Euro Area

Source: Author, based on ONS and Eurostat data

But to truly understand what’s happening, we need to examine the granular inflation data. We find that a small number of products are responsible for driving the UK–Euro Area food inflation gap (see Figure 2) – and their price dynamics can be explained largely by a mix of global and domestic weather shocks.

Three items alone account for 42% of the gap. The top 15 items account for close to the entirety (87.5%) of the UK’s divergence from the Euro Area. This concentration in a relatively small number of weather-affected products undermines broad-based explanations such as labour costs as the primary driver of the wedge.

Figure 2. Proportions (three-month averages, year on year) of the UK–Euro Area food price inflation gap accounted for by top drivers of the gap

Source: Author, based on ONS and Eurostat data for August to October

The nation’s sweet tooth

The number-one driver of the gap – chocolate – reveals the real story at play: a combination of climate change impacts and differing consumption habits. Chocolate alone accounts for a fifth of the divergence between UK and Euro Area food inflation. Poor cocoa harvests in West Africa, driven by extreme rainfall, related disease outbreaks, and extreme heat and drought, have sent prices soaring over the past two years. But this shock is hitting the UK’s food inflation figures much harder because of how much of our food spending goes on chocolate.

In the Euro Area, chocolate accounts for 2.3% of the ‘food and non-alcoholic beverages’ basket used to measure inflation. In the UK, it is close to 6%, which is considerably higher than any Euro Area country. With chocolate inflation running at 17.5% in the UK and 15.1% in the Euro Area, this basket ‘weight effect’ represents the vast majority of why chocolate is contributing almost 0.7 p.p. more to UK food inflation than to the Euro Area’s.

Figure 3 shows the gap contribution of each item in the food basket and the extent to which these are driven (or offset) by differences in inflation rates (rate effect) or differences in basket composition (weight effect).

Figure 3. All contributions (percentage points, three-month averages, year on year) to the UK–Euro Area food price inflation gap, including rate v. weight decomposition

Source: Author, based on ONS and Eurostat data for August to October

Clearly, the inflationary effects of the British collective sweet tooth do not stop at chocolate.Among the drivers of the gap, we also find ‘other bakery products’ (which includes products such as biscuits and cakes), soft drinks, breakfast cereals and other cereal products, confectionery products, and edible ices and ice creams. These products together account for close to half of the UK–Euro Area food inflation gap. For all of them, inflation rates are higher in the UK, but critically, they also hold a higher share of the UK food basket than in the Euro Area, amplifying their impact on the UK’s food inflation figures. Take soft drinks, for example: they are adding 0.2 p.p. more to UK food inflation than to the Euro Area’s, and over half of this difference stems from the fact that soft drinks account for twice as much of the UK’s food basket as they do the Euro Area’s.

Furthermore, these items tend to contain significant amounts of sugar, the price of which spiked in late 2023 as drought and other climate-related disruptions affected imported cane sugar and domestic sugar beet production. Europe also experienced an episode of sugar inflation, but it peaked earlier and fell earlier and further (see Figure 4). Therefore, differences in sugar price inflation rates, their persistence and pass-through to other items in the basket may account for some of the divergence in inflation rates across these sweet products. The lag times in passthrough of price changes in these items might reflect different supply chains and needs an understanding of the market structure.

Pervasive role of climate change

Climate change has also played a role throughout most, if not all, of the other top drivers of the gap. Olive oil is a notable case, as it is the biggest downward contributor to UK food inflation currently, yet the fourth-biggest driver of the UK–Euro Area inflation gap. This is because, similar to sugar, olive oil inflation is falling much faster in the Euro Area (where it currently stands at -28.1%) than in the UK (where it is -15.4%), as shown in Figure 4. In other words, the droughts in Southern Europe that drove olive oil prices up are having more persistent effects in the UK than in the Euro Area, where olive oil is now offsetting food inflation to a greater degree.

Fresh or chilled vegetables (excluding potatoes and other tubers) are notoriously weather-dependent, but they only became a driver of the gap in recent months, as Euro Area vegetable price inflation is far more volatile than in the UK (see again Figure 4). In the most recent data, Euro Area fresh vegetable inflation fell into negative territory, whereas the UK’s vegetable inflation has remained low and stable. Given this item’s significant share in food baskets, volatility in the Euro Area data can cause large swings in terms of the magnitude and direction of vegetables’ effect on the UK–Euro Area food inflation gap.

Climate impacts can also be specific to the UK. While the potato harvest was affected by drought in 2022–23 in both the UK and parts of the Euro Area, potato price inflation has been more persistent in the UK (see Figure 4), due to a record-wet 2023–24 season that delayed planting and pushed prices up last winter. Beef and veal price inflation shows a much sharper inflation rate split (currently 27% in the UK versus 13.5% in the Euro Area), partly driven by droughts in the UK as well as unseasonal rainfall and flooding that degraded pasture quality and thereby raised feed costs for dairy livestock. Butter has been affected by similar factors, resulting in UK butter price inflation standing at 14.3% compared with -3.7% in the Euro Area.

Figure 4. UK and Euro Area annual inflation rates (%) for several weather-affected products

Source: Author, based on ONS and Eurostat data

These forces can work in the other direction too. Coffee, for instance, which has also been severely hit by various extreme dry, hot and wet weather events, is the strongest offset to the food inflation gap, partly because it constitutes a bigger proportion of the Euro Area’s food basket (as shown in Figure 3). But at the moment, the UK is coming off worse on the whole.

Implications for monetary policy?

Overall, the detailed data suggest that the UK–Euro Area food inflation gap is not primarily about labour or packaging costs. The bigger story seems to be a mix of global and domestic climate shocks combined with Britain’s particular food habits.

Some argue, nonetheless, that high food price inflation should make the Bank of England more cautious in easing monetary policy, as food prices play a disproportionately significant role in shaping household inflation expectations, which could feed into higher wage demands or spending. But empirical evidence suggests such second-round effects are unlikely. For example, the Bank’s most recent Monetary Policy Report (November 2025) shows that food supply shocks have historically only had minor effects on the actual Consumer Price Index (CPI) via an inflation expectations channel.

Ultimately, food prices are notoriously volatile. Their first-round effects are better managed with targeted fiscal and regulatory measures – as is the case, too, for energy supply shocks. Similarly, the differences in passthrough of price changes in specific food markets are best addressed with targeted tools from competition and markets authorities.

The author would like to thank Dr Swati Dhingra (Member of the Bank of England’s Monetary Policy Committee) for her support in preparing these remarks.