Economics bulletin 17 March
16 March 2023Your overview of economic and policy news with a focus on the food and consumer goods industry.
Your overview of economic and policy news with a focus on the food and consumer goods industry. Featuring the latest developments and guidance on the rising cost of living, disruptions to supply chains, the Ukraine crisis, labour shortages, policy developments and adapting to a new relationship with the EU.
Spring Budget 2023 – impact on the food industry
The Chancellor of the Exchequer has announced the Spring Budget for 2023. Some of the key measures impacting the food and consumer goods industry include:
Corporation Tax will rise from 19% to 25% from April 2023
Businesses will benefit from “full expensing” (i.e. the ability to “write off” capex against Corporation Tax)
A new tax deduction will be offered to R&D-intensive SMEs
There are extensive new policies making it easier for various groups to access work and to bring those currently inactive back into the workforce. These measures are aimed at UK residents and do not apply to overseas workers
Policy measures will support strategically important business sectors including advanced manufacturing
For individuals
The Energy Price Guarantee will be held at £2,500 until July, before tapering to £3,000 – rather than tapering in April as planned
Households on pre-payment meters will pay the same fuel prices as direct debit customers
Most alcohol duty will rise, but draught beer served in pubs will benefit from special concessions
Tobacco duty will rise
Plans for childcare support for those with children aged 2 and under
The tax-free limit for pension savings during a lifetime will be abolished in April
The annual pension allowance will go up from £40,000 to £60,000 in April
No major income tax or national insurance giveaway for individuals – tax levels will remain very high for the foreseeable future
See our full analysis video and article of the budget at igd.com/social-impact/economics.
Planning for a weak recovery
The Office for Budget Responsibility has published its latest Economic & Fiscal Outlook report. The key predictions include:
Growth in 2023 will be weak, but a technical recession will be avoided
Inflation is expected to fall quite quickly, reaching 2.9% YOY by the end of 2023
Food price inflation will weaken through 2023, but will remain positive until 2028
Real household disposable income will fall this year and next year, by around 6%
It is going to be important to think about what issues food businesses need to plan for should a weak recovery occur. Register your place here and be the first to hear our next Viewpoint update: Time to plan for a weak recovery?
Labour market remains robust
New data from ONS shows that the UK labour market remains fairly robust, in spite of increasing economic pressure.
Employment rose slightly in December 2022, reaching 32.8m, although this is still short of the 33.1m seen just before the outbreak of COVID-19.
Unemployment remains low at 3.7% in December 2022 and there is no sign that redundancies are rising.
About 155,000 people have ceased to be economically-inactive since July 2022. See here for more details.
Real pay remains under pressure
New data from ONS has revealed that average pay, including bonuses, in the UK was £630 per week in January 2023, up 5.4% year-on-year. However, living costs are still outpacing inflation, leaving most workers worse-off in real terms.
IGD calculates that “real pay” in January 2023 was about 8% lower year-on-year (using RPI to measure inflation) or about 5% (using CPI). See here for more details.
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