Economics bulletin 12 January

What’s in store for 2024?

2024 is set to be a critical year for the food and consumer goods industry. Businesses will be focussed on margin recovery at a time of low economic growth and ongoing pressure on household incomes.With a general election expected at some point in 2024 it is unlikely there will be significant policy development until a new government is in place.Register to be the first to receive our upcoming Viewpoint Report: With food inflation fading, what’s in store for 2024? and see our NEW food inflation forecasts, our predictions for the economy, consumers and government policy in 2024.

GDP rises

The ONS has reported that GDP increased by 0.3% in November 2023, following a decrease of 0.3% in October. GDP declined by 0.2% in the three months to November 2023. Retail trade, excluding motor vehicles grew by 1.3% in November. Manufacturing of food products, beverages and tobacco increased by 1.4%.

IGD Viewpoint: Burdened by high debt, high base rates and high commodity costs, major economies including the UK are still struggling to recover from the shock of the pandemic.

UK economic growth in the short-to medium-term is expected to be flat as the UK’s recovery from the pandemic has stalled.

Mortgage rates falling

The Governor of the Bank of England commented that he hopes falling mortgage rates is ‘something that continues’ in order to relieve pressure on households.

The average 2-year mortgage rate has fallen sharply since the turn of the year as changes in expected interest rates feed through to the mortgage market. The Bank of England is due to announce its next interest rate decision at the beginning of February.

IGD Viewpoint: Declining mortgage rates will come as welcome news to those consumers who have experienced significant increases in mortgage payments. However, the ONS reported that private rental prices increased by 6.1% in the 12 months to October 2023. This will have a particular financial impact on lower income households.

Prepare for import changes

UK businesses importing food, drink and other goods from the EU (including Ireland) will be affected by the upcoming implementation of the Target Operating Model on 31 January 2024. Changes are intended to reduce burdens on businesses and to reduce trade friction.

Changes will include:

• Health certification on imports from the EU of high-risk food and food of non-animal origin

• Health certification on imports from the EU of medium risk animal products, plants and plant products

• Pre-notification for some goods from NI and Ireland

Further changes are planned for April and October 2024. Further information will be provided in a series of webinars DEFRA is organising to ensure businesses are taking the appropriate actions and are prepared for the changes.

Farm flooding support

Farmers who have experienced flooding from Storm Henk could be eligible to receive grants of up to £25,000 through the Farming Recovery Fund. Some farmers have reported flooding damaging farm buildings and autumn-planted crops (e.g. Winter wheat).

IGD Viewpoint: Flooding can be disastrous for the individual farmers who find their fields flooded, however, there are more widespread impacts felt from the wet weather.

The heavy rain makes it more difficult to access fields across the UK with heavy equipment, possibly threatening spring planting. This would make it harder to recover losses and could have impacts on food supply and food inflation later in the year.