Economics bulletin 20 May

Date : 19 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.

Delay to HFSS restrictions

Planned restrictions on products high in fat, salt or sugar (HFSS) have been delayed by the government due to the “unprecedented global economic situation and in order to give industry more time to prepare for the restrictions on advertising.” Key announcements include:

  • Restrictions on Volume Price promotions (e.g., BOGOF) have been postponed by one year until October 2023.
  • The restrictions banning adverts for HFSS products on TV before 9 p.m. and paid-for adverts online will also be paused for a year, meaning they come into force in January 2024
  • Location restrictions preventing HFSS items being shown at the front of store, on gondola ends, at checkouts and online equivalents will come into force in October 2022 as planned.

See here for further analysis of planned changes to HFSS products.

Rising inflation

UK inflation has reached its highest level in 40 years, recording 9% on the CPI measure and 11.1% on the old RPI measure. Price rises in food and drink are accelerating significantly, up 0.8% over April alone to 6.7% year on year. See here for more details.

This comes as the Governor of the Bank of England warned of “apocalyptic” food price rises as the impact of the war in Ukraine on the global food system begin to show.

Wheat prices have increased further following the announcement that India is introducing an export ban to protect domestic supplies. Wheat prices have now risen by more than 60% this year.

To read more insight on the future of food prices and how the economy and shoppers may react, read our latest Viewpoint report and look out for our Viewpoint Special: Exploring the outlook for food price inflation – due out in June.

Real incomes declining

The average weekly wage increased by 7% over the year to March 2022. Adjusting for the impact of RPI inflation, workers are 1.3% worse off than a year ago. Taking out the effect of bonuses, which tend to benefit higher earners, inflation is outstripping wage growth by 4.2%. See here for more details.

Labour demand outweighs supply

For the first time since records began, vacancies across the UK outstripped the number of people seeking work, as the UK labour market continues to tighten. However, 21.4% of 16-64s are now economically inactive, up over 1% on pre-pandemic levels. See here for more details.

Availability concerns increase

The impact of the war in Ukraine is leading to increased availability concerns for UK shoppers. In the latest shopper research conducted for IGD (11-12 May 2022) more than two thirds of adults (68%) interviewed experienced shortages of some food and groceries in-store or online recently. This has increased significantly since last month (+11%). See here for more details.

Northern Ireland Protocol update

The government intends to introduce legislation to amend the Northern Ireland Protocol. The Democratic Unionist Party (DUP) has refused to join the Northern Ireland (NI) Executive unless issues with the NI Protocol have been resolved.

Maroš Šefcovic, the Vice-President of the EU, reacted by stating that the proposed legislation “raises significant concerns. Unilateral actions contradicting an international agreement are not acceptable.”

The Foreign Secretary has stated that the preference is to reach a negotiated settlement with the EU. Talks are expected to continue.

More economic news and analysis

Sign up to our bulletin

Our round-up of the latest economic and political news, focused on FMCGs