Economics bulletin 12 May

Date : 12 May 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, disruptions to supply chains, the Ukraine crisis, labour shortages, policy developments and adapting to a new relationship with the EU.

Inflation to be more persistent

The Bank of England has forecast that inflation will remain more persistent than previously expected, in part due to a slow decline in food inflation over the rest of the year. The Bank is now forecasting inflation will be around 5% at the end of 2023 rather than the 4% previously forecast.

Economic growth expectations for 2023 have been upgraded by 0.75 percentage points to 0.25%. The UK is no longer expected to experience recession.

A slower decline in food inflation was one of our key findings in our latest Viewpoint report: Time to plan for a weak recovery?.

Interest rates high

The Bank of England Monetary Policy Committee has voted to raise interest rates for the 12th consecutive time from 4.25% to 4.5%. Interest rates are now at their highest level since October 2008. In our latest Viewpoint report, 46% of those with a mortgage or who rent said they would have to cut back spending further to absorb increases in mortgage rates.

Sluggish GDP

UK economic activity fell by 0.3% in March 2023, following flat economic growth in February 2023. GDP is estimated to have grown by 0.1% for the first quarter of 2023.

The largest contributor to the fall in March was the services sector, down 0.5%. Retail sales excluding motor vehicles and motorcycles, experienced a fall of 0.9% in March.

Retained EU law update

The Government is tabling an amendment to its Retained EU Law Bill, replacing the sunsetting of all retained EU laws by the end of 2023 with a list of 600 laws that the Government is planning to replace by the end of the year. This in response to feedback from businesses and other organisations.

The list of laws that will be affected will be announced.

Target Operating Model Update

The risk categorisations of the Target Operating Model for the imports of animals, animal products, plants and plant products from the EU has been published.

Goods will be categorised as either high, medium or low risk and each category will define the level of Sanitary and Phytosanitary checks that will be applied. These categorisations will come into force from 31 October 2023.

The risk categories for plant and plant products can be viewed here, with the categories for animal and animal products viewed here.

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