Today’s statement comes amid a climate of flatlining growth, persistent inflation on core items and the highest UK tax level in seventy years. IGD’s Economists have reflected on the implications of the Chancellor’s announcement today, and the measures intended to mitigate the current crisis.
James Walton, IGD chief economist, said: “The Autumn Statement includes special policy measures to support investment in selected, strategically important industries. These are listed as motor vehicles, aerospace and life sciences. Food production, processing and distribution are not mentioned, despite their huge economic value – food is the biggest manufacturing sector and is, arguably, more important to shopper welfare.”
Michael Freedman, IGD head of economics said: “Today’s Autumn Statement has the potential to provide some welcome news for hard pressed consumers, particularly the significant rise in the National living wage from £10.42 to £11.44 per hour. Our Viewpoint reports have highlighted how the least well off have been most impacted by the cost-of-living crisis. The 2% reduction in national insurance will benefit 27 million people from January, after the Christmas trading period. However, it is still unclear what the overall impact on consumers will be with changes to the energy price-cap to be announced shortly. Many are still feeling scarred by high food price inflation, relatively high interest rates and the highest tax burden for 70 years.”
The good news is that all items inflation has dropped sharply, in line with the government’s plan to halve inflation, with food and drink playing a significant role. However, inflation on other goods and services remains persistently high. While there are still challenges to economic growth, a handful of industries can make an impactful contribution. The food industry is one of them. IGD’s new Economics Viewpoint report: ‘Powering the Everyday Economy, – the role of the food system’ explores the value of the UK food industry to support growth and resilience at a local and national level.
The report emphasises that ‘recognising the value of the whole food system is essential to a thriving UK.’ Food and Drink remains the largest private sector employer in the country, accounting for one in eight jobs and 40% of all UK retail sales. This is partly due to the diversity of job roles across the supply chain from farm to fork. Food and consumer goods stores also signify 40% of all UK retail activity. Food and drink is furthermore the largest manufacturing sector, annually worth 25 billion. As such, the British food industry is critical to powering both local economies and our wider infrastructure.
The report reveals that, although unemployment is ‘nudging up, ‘the food industry is uniquely placed to get people into work. While raising base interest rates has slowed inflation, demand for goods is still low due to continued financial stress, with lower income households particularly experiencing food stress. A significant 46% of lower income households have been identified as most likely to be cutting back on food and grocery shopping in the next few months. IGD’s experts predict that the wage growth experienced by some industries may encourage workers to pay-off debt rather than spend.
As a major producer that includes the sectors of manufacturing, agriculture, retail and transportation, the food system will ‘need to work together, like never before, to resolve some of our biggest national challenges.’ The report iterates that the industry can significantly impact on net zero ambitions, and that this has become more relevant as the government has become less interventionalist.
Matt Stoughton-Harris, IGD’s economics and public policy manager, said: “Recent months have seen delayed legislation across the waste and resources agenda, with businesses anxious to gain more certainty of the landscape in the run-up to the General Election.”
Among other measures, businesses are encouraged to turn to their workforce attraction and packaging policies to drive resilience, growth and make a positive dent in Carbon emissions. IGD is already working closely with education and food industry leaders to bring careers opportunities to thousands of young people through employability programmes. Our sustainable packaging programme is, equally, reaching decision-makers on the national and international stage.
As the General Election approaches, IGD’s Economists expect to see food inflation slowly decline, with inflation sitting at 8-10% by the end of this year. However, as outlined in the report, the business landscape is complex and uncertain. ‘Powering the Everyday Economy’ via a collaborative food industry is essential to increasing growth, resilience, consumer confidence and alleviating stress to households in communities across the UK.
