At the start of a critical year for the food and consumer goods industry and households across the UK, IGD has released an in-depth Economics Viewpoint Report and new food inflation forecast.
With a general election looming and low household income on the rise, food and consumer goods businesses will need to move through a complex economic and political landscape, while meeting the needs of shoppers.
IGD’s new forecast shows that inflation will not turn negative until at least 2028, estimating that food and drink inflation will sit at between +0.3% to +2.3% at the end of 2024, compared to 8% currently. As businesses will be under pressure to observe margins, the report states that living standards are expected to fall lower than pre-pandemic levels.
In fact, according to new IGD research, inflation will level off at +1% to +2% by 2025, contributing to a cost-of-living crisis for some time. Contrastingly, IGD’s analysts estimate that less shoppers will be cutting their expenditure. Although, it is suggested that many will be using resources to pay-off debt.
James Walton, chief economist at IGD, says: “For the foreseeable future, UK output will remain flat, meaning that economic recovery from the Pandemic is now in the past rather than the short to mid-term future.”
Michael Freedman, head of economic and consumer insight, says: “The recent inflation figures highlight that the cost-of-living crisis is still real for many consumers. There is a real divide between mainstream society and those on the lowest incomes. A one size fits all approach to meeting customer needs will not suffice in this market.”
As political parties share their plans for reforming the UK economy towards the General Election, food businesses will also need to keep abreast of a slew of up-coming new policy changes.
Ahead of the Spring Budget, there will be a full roll-out of the Target Operating Model, which will see processes at borders change and potentially slow down imports on the road. Other new policy activities include:
- a review of origin labelling for food and consumer goods
- an up-date on the interoperability of the deposit return scheme
- the government’s response to the Independent Review into Labour Shortage in the Food Supply Chain
The latter will see food and consumer goods companies focus on how they recruit and retain talent. IGD has been charged by government to lead the industry response in this work.
As the British food and consumer goods sector strives for resilience in the run-up to an election, IGD’s experts observe that: “The Conservatives will be compelled to take action on previously stalled food security and environment policies in the event of a third term, while Labour have shared a Green prosperity plan that would increase investment in businesses, alongside loosening the supply-chain with improved relationships with the EU,” said Matt Stoughton-Harris, economics and public policy managerIGD.
Regardless of which government inherits the UK’s complex economic and policy landscape, IGD’s latest Viewpoint Report recommends that food businesses plan ahead to stay ahead of policy changes in a tough climate of low economic growth.
