Economics bulletin 08 December

Economic recovery

A new report titled Ending Stagnation – a new economic strategy for Britain, from the Resolution Foundation suggests that a toxic combination of slow growth and high inequality is straining the living standards of low and middle income households in the UK. Real wages have flatlined since 2007, costing the average worker £10,700 per year in lost wage growth.

Sir Keir Starmer, leader of the Labour party, has insisted that the UK will face “huge constraints” on public spending if Labour were to win the next election. Economic growth “will have to become Labour’s obsession if we are to turn around the economy”.

As you plan for 2024, download our latest free Viewpoint report for our quarterly summary of the economic landscape, including forecasts for economic growth and inflation.

IGD Viewpoint: The Resolution Foundation report provides a good analysis of the current issues and includes 10 key steps to ending stagnation. This included a proposal that Britain must build on its strength as the second biggest services exporter in the world. There is also a key role for the food system, from farm to fork, in driving economic growth.

With a presence in every community across the UK, the food system collectively powers the everyday economy, employing over 4 million people. It is the largest private sector employer, providing 1 in 8 jobs.

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.

Migration and the food industry

The government has announced a package of measures intended to cut net migration to the UK. This includes:

• From Spring 2024, the earnings threshold for overseas workers will increase to £38,700

• The 20% salary discount for occupations on the Shortage Occupation List will be removed. The Shortage Occupation List will be replaced with a new reduced Immigration Salary List.

IGD Viewpoint: Labour shortages in the food supply chain have been a problem for many years and many roles across the supply chain are filled by migrant workers.

The proposed revision of the Shortage Occupation List is unlikely to be impactful for the food and consumer goods industry as few occupations relevant to the industry are currently included.

The significant increase in the earnings threshold for overseas workers is likely to have an impact. If food businesses want to source additional labour from overseas, then they will have to pay more. Last week, we explored what record migration levels mean for the food industry. See our full analysis here.

Shopper Confidence improves

IGD's Shopper Confidence Index has improved again to -8 in November 2023, the highest level since August 2021. These results came at a time when the government achieved its target of halving inflation by the end of the year.

Financial confidence improved amongst those on the lowest incomes. Plans set out in the Autumn Statement to lower National Insurance and increase the minimum wage may have contributed to this.

ShopperVista subscribers can read the full Shopper Confidence Index report here.

Cost of Obesity

Obesity and its associated impacts are costing the UK economy nearly £100bn, nearly 4% of GDP, according to a report from the Tony Blair Institute for Change.

£35bn of the costs are associated with lower productivity and increased NHS treatment costs. As the UK’s population ages, costs could increase by a further 10% in real terms to 2040.

Some food manufacturers and retailers have responded to the UK Government’s Childhood Obesity Strategy through the reformulation of HFSS products to meet non-HFSS requirements.

You can read our Health team’s latest report which explores the reformulation actions that food businesses have taken in response to the HFSS legislation with a view to inspire further action.