Economics bulletin 13 May

Date : 12 May 2022

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 Ukraine crisis, the rising cost of living, labour shortages, COVID-19 and adapting to a new relationship with the EU.

Food labelling

The Food Standards Agency is looking to ensure a pragmatic approach is adopted by enforcement authorities where oils are needing to be substituted ahead of labelling changes.

Existing guidance allows the use of refined soya bean oil, palm oil and coconut oil as alternatives to sunflower oil, without changing food labelling on packaging.

Fertiliser issues

Fertiliser prices have risen significantly due to rising energy costs as a result of the war in Ukraine. This is causing a decline in demand for fertiliser leading to some concerns around the viability of fertiliser production, and in particular at the CF Fertiliser plant in Billingham (a producer of vital CO2 supplies).

Commercial discussions continue to ensure the continued operation of the plant. Farmers are also being encouraged not to delay buying fertiliser, supported by AHDB modelling which suggests that this will be of benefit despite higher price.

Northern Ireland protocol uncertainty

There continues to be uncertainty around the future of the Northern Ireland (NI) protocol. The government has received legal advice that it would be lawful to override parts of the Brexit arrangements for Northern Ireland.

Following the recent NI Assembly elections, the Democratic Unionist Party (DUP) has indicated that it will refuse to join the NI Executive unless issues with the NI Protocol have been resolved.

The EU has stated that it would look at introducing trade sanctions should the UK override the NI Protocol.

Queen’s Speech

Several of the bills included in the Queen’s Speech may impact UK food and consumer goods businesses:

  • The Non-Domestic Rating Bill will look to modernise the business rates system to allow more frequent re-evaluations.
  • The Genetic Technology bill aims to position the UK as a leader in agri-food research and innovation.
  • The Animal Welfare (Kept Animals) Bill will ban live exports of livestock and strengthen animal welfare.

Economic activity declines

UK economic output fell by -0.1% in March, down from +0.1% in February. Over the first quarter of 2022 the UK economy grew by 0.8%.

Last week the Bank of England warned that the UK will experience a “sharp economic slowdown” due to the rising cost of living and global supply chain concerns.

Food and drink exports recovering

Food and drink exports are recovering from the slowdown driven by the pandemic and EU Exit, according to a new report from the Food and Drink Federation. Key findings include:

  • Scotland accounts for almost 30% of total exports, worth £5.7bn. Scottish exports have growth 14.6% since 2020 but remain 5.6% below pre-COVID levels.
  • England has been the nation most impacted by the pandemic. Exports remain 15.3% below pre-pandemic levels.

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