As the United Kingdom edges toward its Autumn Budget on November 26, 2025, the nation’s food industry and millions of British households are bracing for what could be a costly festive season. At the heart of the storm is a stark warning from Giles Hurley, chief executive of Aldi UK, who has cautioned that further tax hikes or regulatory burdens in the upcoming budget could trigger a fresh surge in grocery prices—already at record highs—just as families prepare for Christmas.
“Any policies which affect the operating costs of business should be considered very, very carefully because of the very real risk they find their way... back into the food system and onto prices,” Hurley told BBC News. His comments reflect growing anxiety across the retail sector, which has seen a relentless rise in costs from all sides: higher National Insurance contributions, a steep increase in the National Minimum Wage, and the introduction of new packaging regulations.
The impact on Aldi itself is telling. Despite annual sales climbing to £18.1 billion, the supermarket’s profits have fallen by more than a fifth to £435.5 million. The company attributes this drop largely to investments in price cuts, infrastructure, and higher pay for its workers. In an effort to shield shoppers from the worst effects of inflation, Aldi has poured more than £300 million this year into offsetting rising goods costs. “If you speak to customers across the country, they’ll tell you that inflation is persistent and urgent,” Hurley said, emphasizing the need for government action and more support for British farmers.
It’s not just Aldi feeling the pinch. Last month, 60 CEOs from major UK retailers—including Hurley—wrote to Chancellor Rachel Reeves, urging her to avoid further taxes on their industry in the upcoming budget. Their joint letter warned that recent government policies, such as changes to employer National Insurance, National Living Wage increases, and a new packaging tax, have already added a staggering £7 billion in costs to the sector. These costs, the letter argued, have led to job losses and falling investment, and are now threatening to push essential food prices even higher.
The Food and Drink Federation (FDF), whose members produce a quarter of all food and drink sold in the UK, has sounded the alarm as well. The FDF’s latest forecast predicts food inflation will rise to 5.7% by December 2025, before slowing to 3.1% by the end of 2026. UK food inflation is currently at 4.9%—already ahead of general inflation, which stands at 4.2%—and far outpacing the rate in comparable European economies. According to Eurostat, food inflation in the EU is just 3.9%.
FDF chief executive Karen Betts described the current trajectory as “steeper than anything in recent decades.” She noted that between January 2020 and July 2025, food and non-alcoholic drink prices in the UK jumped by 37%, compared to a 28% rise in overall prices. Some staples have seen particularly sharp increases: sugar prices have soared by 56%, whole milk by 46%, and cheese by 31%. “The costs are such that companies can no longer absorb them and are having to pass at least some of them on to consumers,” Betts said. “As this autumn’s Budget looms, it’s critical that government does not add further to the already high costs of regulation in our sector. We’ve been hit by rising taxes, employment costs and a new packaging tax.”
The main drivers of this inflation, according to the FDF, are not just global factors like commodity price spikes or supply chain disruptions—though those have played a role. The report singles out domestic policy decisions as the key accelerant. In particular, the rise in the minimum wage (up 69.6% between 2016 and 2025), higher National Insurance contributions, and the new packaging rules set to add £1.1 billion in costs for food and drink businesses from October 2025, are all cited as major contributors. The looming Employment Rights Bill, due to take effect in 2026 and 2027, is expected to further raise labor costs across the sector.
Hurley, walking through an Aldi store in Sutton Coldfield, pointed to the real-world impact on everyday shopping. A 500g pack of lean beef mince, for instance, has jumped from £3.79 at the start of the year to over £5 at all major supermarkets. “Cattle prices are up 30% this year and herd sizes are dropping, and that is playing into the price of mince,” he explained. The Bank of England has also warned that the new levy on retailers to reduce packaging waste could drive food prices even higher this autumn.
For British households, the timing couldn’t be worse. According to research by Nimblefins, Christmas 2024 cost the average household £719, with £350 of that spent on food and drink alone. With food inflation running high and further tax hikes likely, many families may have to cut back on seasonal treats, festive meals, or even gifts this year—an unwelcome prospect for both consumers and retailers who rely on the holiday season for a boost in sales.
Despite these pressures, Aldi is pressing ahead with expansion plans. The chain, which reclaimed its title as the UK’s cheapest supermarket from Lidl in September, now operates 1,060 stores and intends to open another 80 over the next two years, backed by £1.6 billion in investment. Still, Hurley is adamant that the government must do more to ensure a resilient British food sector. “Ultimately, a resilient British food sector is utterly dependent on having a resilient British farm sector,” he said, calling for more certainty and support for farmers.
The Treasury, for its part, has promised that the upcoming budget will “build an economy that works for working people,” with a focus on cutting inflation and maintaining a tight grip on public spending. Chancellor Reeves has hinted at “difficult decisions” ahead, acknowledging the need for honesty about tax rises, even as she faces pressure to avoid breaking Labour’s manifesto promise not to raise headline rates of income tax, National Insurance, or VAT.
With the Autumn Budget looming and food inflation already outpacing general inflation, all eyes are on the government to see whether it will heed the warnings from industry leaders or risk a festive food price surge that could leave British households and retailers facing a bleak Christmas.
