Economics bulletin 06 October

Date : 05 October 2023

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, the Ukraine conflict, labour shortages, policy developments and adapting to a new relationship with the EU.

Inflation vs taxes

The Prime Minister and the Chancellor have confirmed that the priority of the government is to halve inflation by the end of the year as opposed to cutting taxes.

The Prime Minister said that “The best tax cut I can deliver for the British people is to halve inflation.”

With taxes likely to remain high, the latest research from the Institute for Fiscal Studies indicates that by the time of the next general election taxes will amount to 37% of national income, the highest level in 70 years.

IGD Viewpoint: Last month the ONS estimated that public sector net debt was 98.8% of UK GDP, 2.3% higher than the previous year and the highest levels seen since the early 1960’s. The state of government finances is central to why the tax burden has increased from 33% of national income to 37% in this parliament.

With inflation easing in line with IGD projections, now is the time for your business to plan for 2024. Register for our upcoming free webinar on 16 November 2023 where we will:

  • Review the economic landscape as we move towards 2024
  • Outline why the UK food and consumer goods industry is critical to economic recovery
  • Provide an update on the latest consumer sentiment and how household prosperity is faring in the run up to Christmas trading
  • Explore how policy developments are being impacted by the looming general election

More upbeat shoppers

IGD's Shopper Confidence Index has improved to -9, the highest level since December 2021. This compares with a score of -25 this time last year. Just 16% expect food prices to get much more expensive in the year ahead compared with 47% this time last year.

IGD Viewpoint: The real value of wages is rising for the first time since autumn 2021 which is resulting in improvements to financial confidence. Fewer now expect to be financially worse off in the year ahead.

National Living Wage

The Chancellor also confirmed that the National Living Wage will rise to at least £11 an hour from next April. The Low Pay Commission predicted in April that the National Living Wage will be uprated to £11.16, however, given strong pay growth over recent months, this may be exceeded when they provide final recommendations this month.

Energy and petrol bills

Annual energy bills are forecast to rise by £73 to £1,996 from January 2024 for a typical dual fuel household paying by direct debit.

Energy prices are expected to fall slightly in the second and third quarters of the year, before increasing again in the final quarter of 2024 as energy prices look set to remain high for the foreseeable future.

This comes as petrol prices continue to increase driven by the oil producer group OPEC restricting global supply as well as the relative weak value of sterling.

Low alcohol consultation

The Department for Health and Social Care has launched a public consultation to raise the threshold for describing a drink as ‘alcohol free’ to 0.5% alcohol by volume (ABV).

The threshold in the UK is currently 0.05% (ABV), which is below several peer countries such as the USA and Germany, who have their threshold set at 0.5% ABV.

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