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 July saw the Office of National Statistics (ONS) produce yet more bad
news for UK businesses and consumers.
Preliminary data shows that economic output (i.e. the rate of wealth
generation within the UK) in the second quarter was down 0.8% versus the
previous quarter, and down 5.6% on the same quarter last year, when the
effect of inflation is excluded.
The rush to produce economic data means that it is rarely wholly
accurate at the first attempt, with ONS gradually refining its readings
as more information becomes available. Data is therefore restated as
required.
Recent revisions from ONS have pushed back the boundaries of the
current recession and it now appears that the recession started sooner,
hit harder and moved faster than was initially anticipated. The UK
economy is now believed to have been contracting, quarter on quarter,
since Spring 2008.
Thankfully, the rate of decline now seems to be slowing but, by any
standard, 2009 will be a dismal year for most of us.
Independent forecasters are becoming evermore pessimistic and now
suggest that output for the year will be down 4.1% on 2008, with 2010
seeing only a flicker of improvement. (This domestic view is broadly
in-line with the views of various respected international bodies such as
the ECB, IMF and OECD).
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The UK is not the only developed country to have tumbled into a deep
recession – indeed, almost all have suffered a stunning blow. Government
responses such as base rate cuts, fiscal stimuli and quantitative easing
have softened this, but not to the extent of stimulating a quick
recovery.
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Green shoots?
A few indicators are beginning to show signs of improvement – house
prices are levelling-off after a period of steep decline and the
stockmarket performed strongly in July, indicating that at least some
investors are ready to bet on a brighter future.
However, the UK continues to grapple with a number of diverse and
intractable structural challenges, including:
• Ageing transport infrastructure
• Continued contraction of manufacturing
• Demographic change
• Escalating government budget deficit
• Exhaustion of North Sea fuel reserves and a developing shortfall in
electrical generation
• Heavy on financial services
Taken together, these issues will hinder the UK’s attempts to return
to growth in the aftermath of the recession and reduce international
competitiveness (although other countries have their own problems too!).
In the worst case, these factors may trigger a quick return to recession
- the dreaded 'double-dip' effect.
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Access to food was on the agenda at the recent G8 summit in Italy |
Grocery businesses – primary producers, processors and retailers –
have so far proven to be resilient, performing better as a group than
many other consumer-facing businesses. However, operators at every stage
in the supply chain face a further period of tough trading and UK
shoppers will be disinclined to take risks and remain alert for any
opportunity to save money.
A global concern
Pressing economic and financial problems currently dominate the
international agenda, with the debate over globalisation and free trade
remaining active.
However, it is obvious that the concerns of the pre-Credit Crunch
period remain in place and, if anything, are becoming more urgent.
The recent G8 Summit meeting in Italy chose to examine these, with
much of the agenda centred on sustainability issues, such as:
• Access to food
• Climate change
• Energy security
• Health
• Social welfare
Sensitive shoppers
IGD research shows that British consumers remain deeply
concerned about such things and, paradoxically, in the face of growing
economic pressures, ethical questions are becoming even more important
as behavioural drivers.
International comparisons suggest that British consumers may be
leading the movement towards more responsible grocery shopping.
The UK grocery industry
The UK grocery industry likewise continues to develop its responses,
with 2009 seeing a number of new developments:
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Examples of new developments |
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• Asda launched the UK’s first low-carbon beef, with a carbon
footprint more than one third smaller than competing products
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| • Cadbury went
Fairtrade for its Dairy Milk Chocolate |
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| • Morrisons
extended its interests in UK agriculture by taking on new farmland to be
used specifically for the development of more sustainable farming
methods |
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• Sainsbury’s continued to roll out its new standard in store design,
with the new Gloucester Quays store which incorporates innovative
kinetic energy plates for electricity generation |
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| • Tesco was awarded
the Carbon Trust Standard in recognition of its work in
greenhouse gas reduction |
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| • Unilever became
the first food company to set targets for reducing the salt content of
its food products on a global basis |
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Notwithstanding the recession, UK grocery businesses of all types and
sizes continue to invest in improvements which recognise non-financial
measures of success and address the wider impacts of operations.
However, there is still much work to be done; changing consumer
expectations and the legislative environment means that the minimum
performance standard in many areas is rising all the time.
Carbon trading
A good example of this is the introduction of compulsory carbon
trading in April 2010, an important milestone for the UK, affecting
every operator that consumes more than around £1m worth of electricity
annually.
The UK is moving ahead of its European partners and has set itself a
tough, legally-binding target for reducing the output of greenhouse
gases, aiming for an 80% reduction in output by 2050 (versus 1990
levels) – especially challenging in view of the population growth which
is expected over the same period.
Carbon trading has the potential to create revolutionary change in
the grocery industry, by introducing cost in an important area which was
previously free-of-charge, although the impact is difficult to judge at
this point, since in the final stage, the cost of carbon permits is to
be fixed by the free market.
UK grocery processors have already made considerable progress in
improving their carbon efficiency; long-term, greenhouse gas output by
processors is falling while the volume of food produced continues to
rise. Maintaining this momentum may be difficult, however.
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Plainly, leaders in the grocery business will be tested rigorously
over years to come; innovation, strategic awareness, speed of execution
and personal leadership will be at a premium.
More information:
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IGD Convention 2009 - Leadership in
Adversity |
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IGD's Annual Convention 2009, Leadership in Adversity, will feature
some of our industry's most influential and charismatic leaders. This is
a unique opportunity to see them all on the same platform, to learn what
they are doing to lead their businesses - and the wider community -
through the economic turmoil and towards an efficient and ethical
future.
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