IGD – Economics bulletin 11 February

Date : 10 February 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 COVID-19, the rising cost of living, labour shortages and adapting to a new relationship with the EU.

COVID-19 restrictions relaxation

The Prime Minister has announced that the government could remove all domestic COVID-19 restrictions including self-isolation requirements by the end of February. The plans will be set-out in the House of Commons on 21 February

The latest information on restrictions in England can be found here.

Declining absence

With COVID-19 cases continuing to fall absence rates within the food and consumer goods industry due to the Omicron variant are declining.

Businesses can also reduce the risk by encouraging staff to get vaccinated and to receive the booster. See the section on ‘reducing contact for workers’ here for further details.

The Department for Environment Food & Rural Affairs (DEFRA) is requesting that businesses continue to complete a daily labour absence survey.

Availability issues

Given concerns around absence rates, broader labour shortages and new border controls, IGD continues to monitor any impact of product availability. In the latest shopper research conducted for IGD last weekend (4-6 February 2022), more adults are reporting availability issues (66% compared to 63% two weeks ago). Despite this increase, there is no upward trend. Availability issues remain highest for fresh produce and savoury snacks.

More adults have recently felt the need to stock up or purchase more than they normally do (41% vs 37% two weeks ago). There has also been an increase in the numbers saying they will or might stock up (44% vs 39%).

Rising Cost of Living

Tesco chairman John Allan said this week that he expects food price inflation to reach 5% in spring, as widespread cost increases across the industry flow through to retail prices.

These pressures alongside energy price rises are straining household budgets. Reflecting this, IGD’s Shopper Confidence Index dropped to a record low in January 2022.

For more information, see our latest Viewpoint report: Will Inflation Kill the Recovery.

Strong economic recovery

UK GDP grew 7.5% over 2021, recovering strongly from the 9.4% fall over 2020. Growth was strongest in spring, 2.8% in March 2020, as the UK emerged from its winter lockdown. The impact of the Omicron variant and subsequent restrictions on the economy is clear, December saw a GDP contraction of 0.2%. The UK economy remains slightly smaller than pre-pandemic levels. Low economic momentum will leave the UK economy less resilient to future shock events including inflation.

The Bank of England expects inflation to weigh heavily on GDP going forward, predicting subdued growth as the impacts of inflation and increased interest rates take hold.

EU Exit – impact on trade

The Committee of Public Accounts, analysing the impact of EU exit on trade, has found evidence of an impact on trade volumes.

It reported that future changes to border control checks in July 2022 and increased passenger numbers could lead to possible disruption.

Changes to EU-GB Imports and Exports

To date there have relatively few issues following the introduction of new border controls on 1 January and new Animal Health Regulation Export Health Certificates (EHCs) on 15 January 2022.

The government is engaging with the European Commission to clarify the French Border Control Posts (BCPs) requirements for wild caught species of shellfish. Currently BCPs are temporarily showing flexibility to traders, allowing Food Competent Certifying Officers, in addition to Official Vets to sign off shipments.

It is recommended that exporters remain in regular contact with BCPs. For any further information around shellfish exports please contact: [email protected]

Food traders are advised to comply with ongoing safety checks on agri-food goods entering Northern Ireland from Great Britain, following the instruction from the Northern Ireland Executive to halt checks.

See the guidance on trade with the UK as a business based in the EU.

See the key dates for UK-EU transition and support for businesses

Customs consultation

HMRC and the Treasury have published a call for evidence to allow stakeholders across the economy to provide their opinion on the current state of the customs system and improvements that can be made.

Businesses can provide any responses to: [email protected]

More economic news and analysis

Sign up to our bulletin

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