Bulletin: Public sector finances and agriculture

Sustainable agriculture

Farmers will be able to access over £400m in grant funding to support technology and productivity schemes, such as the Improving Farming Productivity grant. Additionally, the Prime Minister has re-committed to maintain the farming budget for England at £2.4bn and publish a UK-wide food security index.

IGD Viewpoint: The current uptake of the Sustainable Farming Incentive has been limited. Time will tell on whether the latest announcement from the government impacts farm business approaches and financial outcomes as well as investment decisions. To understand more about policy development relevant to the food and consumer goods industry, download our latest Viewpoint Report: As food inflation falls, what’s in store for 2024?

Tea availability issues

Our latest consumer research reveals that 1 in 10 consumers have reported poorer availability for tea, double the level from last month (9% vs 5%). Around half of tea consumed in the UK arrives via the Red Sea, where attacks on shipping have led to a decline in the number of ships passing through the Suez Canal. This has led to some supply issues in some stores.

IGD Viewpoint: Events in the Red Sea region seem unlikely to impact food security in the UK significantly, in the short-term. The volume of food goods coming via the Suez Canal is likely to be fairly minor overall, although important in some categories (e.g. tea, coconut milk, exotic fruits, spices).

Lower energy bills

Ofgem has announced that the energy price cap will decline by 12% from April 2024. Annual bills will decrease by £238 to £1690. Independent analysts have forecast bills to decline further to £1,465 in Q3 2024 before increasing to £1,523 in Q4 2024.

IGD Viewpoint: Whilst falling energy prices will come as a relief to many consumers, this fall comes at a time when households will not benefit from the £400 support previously provided by the government.

Around half (47%) of consumers say that changes to energy bills are likely to impact how much they plan to spend on their food and grocery shopping in the next few months.

Public sector finances

UK Government public sector borrowing for January was in surplus by £16.7 billion, more than double the surplus of January 2023. This was the largest surplus recorded since records began in 1993.

IGD Viewpoint: It is not unusual for public finances to be in surplus in January, due to the receipt of self-assessed taxes. Overall, the results do not indicate that public sector finances are in good shape.

With a general election expected this year, the Chancellor may be under political pressure to offer some sort of tax relief for consumers. Realistically, however, there is unlikely to be enough financial headroom for measures big enough to make much difference to household finances.

Infant formula market study

The Competition and Markets Authority (CMA) has launched a market study into the supply of infant formula. This gives the CMA powers to secure information from businesses, rather than relying on voluntary information.

Any recommendations to the government that come from the study will now have a formal status. The CMA intends to publish a final report in September 2024.