A very tough year
At the beginning of 2020, many UK households had endured a decade or more of static incomes1, making it difficult to accommodate slow, but sustained, increases in living costs2.
Some households – especially families – had begun to trim expenditure on food and drink in order to meet other costs3. Most had limited cash reserves – some had none – giving no cushion against economic shock4.
At the time, the most obvious candidate for a “shock” was EU Exit with no trade deal in place. At the time of writing, that remains possible but, in the meantime, Coronavirus has plunged the UK economy into crisis.
Households under pressure
In Q1 and Q2 of 2020, the UK fell into a deep recession, the deepest on record. There is evidence of limited recovery over late Summer and early Autumn, but this may not last if the resurgent virus damps-down activity.
In the meantime, damage has been done – damage that may take many years to repair. Economic effects are beginning to manifest in ways that impact households.
The number of redundancies per month has more than doubled since February and unemployment is rising, especially for young adults5.
According to ONS research, around 21% of households have seen their finances impacted in some way by Coronavirus, usually negatively6.
Within this group, 14% report that they are spending less money on food and drink as a result. This would amount to over 800,000 households - and millions of individuals – reducing their food and drink spending.
Source: Tables 10 and 12, Coronavirus and the Social Impacts on GB, ONS, October 2020
Any significant reduction in spending will have financial impact on suppliers and retailers but, for nutritionists, the major concern may be health and welfare.
This was tackled by Part One of the National Food Strategy, which focused on targeted short-term actions intended to support food security in the most vulnerable homes.
Some retailers have re-doubled efforts to deliver lower food prices to shoppers – each of the four largest retailers have undertaken major price activity in 2020.
Shoppers may require additional support to ensure that they are still able to access good nutrition, despite pressure on their finances.
What next: mid-term
It is likely that Coronavirus will continue to erode household prosperity for some time into the future. EU Exit – possibly under “no-deal” conditions – is also likely to have additional negative effects.
These may take the form of disrupted supply (leading to availability challenges for some goods) and higher trading costs, especially tariffs (leading to higher prices for food and drink).
Availability issues may be offset, temporarily, by additional stockholding in the supply chain although this also raises practical difficulties for businesses, especially at Christmastime.
IGD’s shopper research suggests that most households themselves will not generally have sufficient food stocks to withstand major supply disruption.
Availability challenges may be short-lived, but higher food prices may be a more persistent challenge for hard-pressed households, especially if wages or benefits lag behind inflation.
As is often the case, those already vulnerable are likely to be hit hardest, since households with lower incomes tend to spend a higher proportion of income on food7.
What next: long-term?
In the longer term, government will face a number of daunting strategic challenges.
Most obvious is fiscal rebuilding: managing the enormous burden of debt that has been accumulated as a result of the Coronavirus emergency.
Political attention may return to the issue of “sin” taxes – special levies on alcohol, tobacco or “bad” foods. These offer the chance to raise revenue whilst possibly also nudging citizens into healthier habits.
In reality, however, even the most penal sin taxes are unlikely to fill the fiscal hole. An increase in direct taxation of citizens seem inevitable.
Tax increases could be significant – a recent report by IFS8 suggests that tax increases may amount to as much as £125 per household per month.
Government attention will also turn back to policy development. Changes in a number of policy areas will have some impact on the food and drink industry (eg; agriculture, plastics).
For nutritionists, the major concern may be Part Two of the National Food Strategy. Part One left no doubt that businesses should expect more ambitious action on nutrition and health. Part Two will appear in 2021, with an official response following soon after.9
Given the above, it is reasonable to assume that an increasing number of UK households will have trouble feeding themselves in future – or, at least, trouble feeding themselves well.
Some may be forced to fall back on food banks or other emergency food sources. These are stocked in part via donations of surplus stock from food businesses.
IGD’s charity team will launch a new workstream in November, intended to engage more businesses and share best practice.
In the long term, however, this source of food may dry up, as food businesses reduce wastage. A more reliable means of addressing food insecurity is by developing the prosperity of the least well-off.
Notes and sources
- Households Below Average Income, DWP, March 2020
- Consumer Price Inflation, ONS, October 2020
- Based on IGD analysis of data from Family Spending In The UK, ONS, March 2020
- Family Resources Survey, DWP, March 2020
- Labour Market Overview, ONS, October 2020
- Coronavirus And The Social Impact On GB, ONS, October 2020
- An idea expressed as Engels’ Law
- Green Budget 2020, IFS, October 2020
- Food is a devolved competency - there are separate Food Strategies for each Home Nation