Rising costs are forcing some of the UK’s biggest food and grocery businesses to work more closely with rivals as pressure builds across supply chains already operating on wafer-thin margins.
New research from IGD says higher labour, energy and fuel costs are squeezing every part of the sector, even as retailers, manufacturers and logistics firms are expected to move more goods, more accurately and at lower cost. The result, according to the body, is a widening gap between wh...
Continue Reading This Article
Enjoy this article as well as all of our content, including reports, news, tips and more.
By registering or signing into your SRM Today account, you agree to SRM Today's Terms of Use and consent to the processing of your personal information as described in our Privacy Policy.
at the supply chain is being asked to deliver and what it can sustainably absorb.
IGD believes that gap will accelerate collaboration and speed up investment in technology, with companies increasingly sharing infrastructure, aligning distribution networks and pooling capacity. That, it says, is already helping businesses lower costs, improve utilisation and support investment in lower-carbon transport.
James Rothwell, IGD’s head of supply chain, said the biggest gains are now to be found between organisations rather than within them. He added that collaboration is becoming a commercial necessity rather than a nice-to-have, and argued that the long-term prize could be a more resilient and better connected food system.
The broader economic picture helps explain the shift. Oxford Economics, in work with IGD on the cost breakdown of the so-called food pound, found that margins across the food industry are typically only 1% to 2% net and have narrowed since 2020, despite higher retail prices. In its analysis of a £20.24 basket of nine everyday food items, the industry earned just 29p in profit in 2025.
IGD says food inflation is still being driven mainly by costs rather than excess profits, with labour, energy and other input pressures rippling from farms through manufacturing, packaging, logistics and retail. That leaves less room for supermarkets to absorb cost increases, particularly when shoppers remain under pressure.
There are already signs that the sector is adapting. Retailers, manufacturers and logistics providers are sharing facilities, joining up transport plans and making better use of available capacity, not only to cut spend but also to improve resilience and reduce emissions.
The challenge, however, extends beyond the UK. The World Economic Forum has previously noted that Britain’s heavy reliance on imported food leaves it exposed to global price shocks, while feed, fertiliser and fuel costs continue to feed through the system. In that context, the move towards tighter coordination across supply chains looks less like a temporary response and more like a structural change.
IGD’s latest report, Supply chain of the future, suggests that cost pressure, resilience and sustainability will continue to reshape the industry over the next five years. For businesses that still operate in silos, the warning is clear: the old model is becoming harder to defend.
Source: Noah Wire Services
