Economics bulletin 01 December

Price rise investigation

The Competition and Markets Authority (CMA) has set out the latest findings and next steps in its ongoing review of competition in the groceries sector. According to the CMA:

• Around three-quarters of branded suppliers in the products they analysed have contributed to higher food price inflation.

• Many consumers have responded by switching away from brands to own label alternatives.

• Unlike other products examined, the prices for baby formula have risen by 25% over the past two years, however, there is little evidence of parents switching to cheaper brands. There is very limited availability of own label alternatives.

The CMA has announced the next phase of work will investigate the baby formula market as well as loyalty scheme pricing by supermarkets and its impact on competition.

Download our latest Viewpoint report to understand the outlook for food price inflation.

Economic growth warning

The Governor of the Bank of England has stated that interest rates are expected to remain high for the “foreseeable future” to combat persistent inflation. He also raised concerns over the UK’s future economic growth as the “supply side of the economy has slowed”.

Last week the Office for Budget Responsibility substantially downgraded its forecast of the UK’s economic growth by 1.1 percentage points to 0.7% in 2024.

IGD Viewpoint: Significant challenges to economic growth exist across the UK economy, and only a handful of industries can make an impactful contribution.

The food industry is one of them. Only when we recognise the whole food system, from farm to fork, can we appreciate how critical it is to a thriving UK, in an ever-challenging global landscape.

Download our free infographic to understand the role the food system plays in the UK and to support your conversations with stakeholders.

Migration impact on the food industry

The ONS has also updated its estimate for net immigration for the full year 2022 up to 745,000. This is over three times the pre-pandemic level. Increasing numbers of non-EU nationals came to the UK to work (especially in health and social care) and/or to study. There were also an increasing number who came to the UK for humanitarian reasons (either as principal visa applicants or as dependents).

IGD Viewpoint: In some ways, rapid population expansion might be seen as positive by food and grocery businesses since it represents an expansion of the customer base and higher volume demand, as well as an opportunity to develop economic growth.

However, the current migration regime does not support many food and grocery businesses. The Independent Review into Labour Shortages in the Food Supply Chain made clear that “it is of vital importance that the government widens the eligibility criteria for the skilled worker visa route”.

Read our full analysis of what the increase in migration means for the food and consumer goods industry.

Availability concerns remain stable

In the latest consumer research conducted for IGD (17-19 November 2023), more than half of adults (54%) experienced shortages of some food and groceries in-store or online recently. This has increased marginally since last month (52%).

Availability concerns continue to be highest in in Northern Ireland. This follows a warning by the British Retail Consortium that operational issues with the Windsor Framework “will need to be resolved quite quickly otherwise we would see an impact in terms of choice consumers have in Northern Ireland.”

Read our article for a full analysis.