Economics bulletin 28 July

Interest rate warning

The Bank of England will need to maintain higher interests rates for longer than previously forecast, in order to tackle inflation, according to the IMF. Next week, the Bank of England will decide whether to raise the current interest rate of 5%.

As revealed in our latest Viewpoint report: Persistent inflation, politics and labour challenges, 59% of those who have a mortgage or rent say they will have to cut back spending further. You can read the full report or our one-page executive summary here.

Global outlook improves

The global economic outlook is slightly brighter, with the IMF upgrading its global growth forecasts to 3% for 2023. There remain persistent challenges with the IMF stating that the global recovery is “slowing amid widening divergences among economic sectors and regions”.

The IMF has upgraded the UK’s growth forecast to 0.4% for 2023, up from -0.3% in its April forecast. The growth expectation of 1% for 2024 is below the average of 1.4% for other advanced economies.

Food security report

A new report on Food Security has been published by the Environment, Food and Rural Affairs (EFRA) Committee. The report findings include:

• Calls on the government to explore the options and affordability of extending the provision of free school meals
• Calls on the government to review whether income support packages were sufficient to stop people needing to turn to food banks
• Calls on the government to publish a detailed response to all the recommendations in the Dimbleby Review.
• It also called for an annual analysis by the government on all food security issues. This should include, a full impact assessment on the introduction of a tax on foods high in sugar and salt
• Recommends that the Cabinet Office should undertake a comprehensive review of all aspects of food policy and publish its findings within 12 months of the publication of the Committee's report.

Extended producer responsibility

The payment of fees associated with the extended producer responsibility scheme (EPR) have been delayed by a year from October 2024 to October 2025. EPR ensures that businesses that supply packaging to the market pay for the recycling of this packaging at the end of life.

Large organisations remain required to report their packaging data for the period January to June 2023 before 1 October 2023. From August 2023, large organisations will be able to create an account to report packaging data.

For detailed analysis, please see our article here.

Availability concerns decline

In the latest consumer research conducted for IGD (26-28 July 2023), less than three in five adults (57%) experienced shortages of some food and groceries in-store or online recently. This has declined since last month (64%). While this is the lowest level since March 2022, it is still significantly higher than when this was first measured in July’21 (50%).