Economics bulletin 18 March

Date : 17 March 2022

Your overview of economic and policy news with a focus on the food and consumer goods industry, featuring the latest developments and guidance on the Ukraine crisis, the rising cost of living, labour shortages, COVID-19 and adapting to a new relationship with the EU.

The Ukraine Crisis – supply implications

The UK government has announced further economic sanctions on imports of Russian and Belarussian goods. The products, including spirits, cereals and fish now face an additional 35% tariff above the existing rate.

Industry stakeholders have raised concerns about the impacts of the Ukraine crisis on supply chains and how tariffs will impact cost of production.

Further clarity is being sought around how the tariffs will be applied and the government is expected to issue additional guidance for businesses.

The government has expanded its Export Support Service to cover questions related to the Ukraine crisis. See here for further details.

Inflation and interest rates

The Bank of England has announced an increase of 0.25% in interest rates to 0.75%, back to pre-pandemic levels, to curb rising inflation. As has been the case since 2008, interest rates remain at near historic lows.

Following the impact of the war in Ukraine, the Bank of England now expects inflation to reach around 8% in Q2 2022 and perhaps even higher later this year. This is above its initial forecasts of 7.25%. The Resolution Foundation has warned that inflation is likely to persist over 2022 and peak at 10% in Autumn.

Falling real wages

The latest UK labour market data reveals a continued decline in unemployment, whilst the number of vacancies has reached a new record.

Although the average weekly wage is rising, adjusting for the impact of RPI inflation, workers are 2.7% worse off than a year ago. This raises significant welfare concerns for vulnerable households. See here for more details and our viewpoint.

Further supply disruption

P&O Ferries have halted operations, cancelling crossings for several days, following the termination of 800 of its seafaring staff. Traders with tickets for P&O Ferries are advised to use other operators where available.

P&O Ferries are one of the largest ferry operators in the UK and are responsible for the transportation of 15% of all freight cargo in and out of the UK. Since the outbreak of COVID-19 and the subsequent travel restrictions P&O ferries has been under significant financial pressure.

Changes to EU-GB imports and exports

From 1 July 2022, animal products imported from the European Union will be subject to further checks. Businesses are encouraged to prepare for changes to these rules, further information can be found here.

See the key dates for UK-EU transition and support for businesses

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