Here is my weekly news for week commencing 11th June. Have a good week!
Director – FOB
CBI Economic Forecast: GDP
The UK economy saw a shaky start to 2018, as bad weather caused GDP to near flatline (at just 0.1%), with the construction and retail sectors particularly badly hit. While survey data point to some pick-up in activity over Q2, they also suggest that underlying conditions remain tepid. Consumer-facing sectors are facing a particularly difficult time, grappling with anaemic growth in real household earnings and, in the case of retail, large structural changes as business models shift to capture online and digital sources of growth.
Weather effects aside, the economy has evolved broadly as expected in our last forecast in December. As a result, there is little change to our forecast: we expect GDP growth of 1.4% in 2018—revised down slightly from 1.5% previously, due to the impact of bad weather in Q1—and 1.3% in 2019 (unchanged from our previous forecast). Our forecast is conditioned on the agreement of a transition period with the EU until the end of 2020 and no significant bumps in the negotiations.
The key judgements underpinning our forecast remain unchanged: net trade supports GDP growth, aided by a strong global economy and the lower pound; household spending remains under pressure from squeezed real earnings; and uncertainty over Brexit weighs on business investment. We nonetheless expect slightly more strength in business investment over our forecast than previously, with a growing number of our members spending on automation, robotics and training to circumvent skill shortages.
Risks to the UK’s tepid growth outlook remain skewed to the downside. In particular, a more disorderly outcome to EU negotiations could have significant bearing on financial markets and activity. Global risks have also shifted higher, particularly the prospect of protectionist actions on trade escalating further, choking off the nascent recovery in world trade flows.
Monetary policy and inflation
CPI inflation has been falling persistently since the end of 2017, to stand at 2.4% in May—the lowest in a year. Much of this fall reflects the waning impact on prices of the post-referendum depreciation in the pound. We expect this impact to continue fading, and therefore for inflation to gradually fall back a little further.
The Monetary Policy Committee (MPC) held off raising interest rates at their May meeting, despite strongly signalling further rate rises following the last move up in November 2017. The Committee seemed to be swayed by softer economic data over Q1, and are waiting to see whether this was entirely down to bad weather or whether it marks the start of a more prolonged slowdown.
However, the Bank’s May Inflation Report forecasts show that they expect firmer, but still sluggish, growth to resume from Q2 onwards. Furthermore, the MPC continued to signal an “ongoing tightening” in monetary policy further ahead, as long as the economy evolved in line with their expectations. While the Bank expect only muted growth ahead, they still believe that the economy will grow above its potential rate, thus stoking inflationary pressure. Indeed, the recent firming in wage growth may be an early sign of domestic inflationary pressures building.
With output growth expected to recover in Q2, we expect the MPC to raise interest rates at their August meeting, by 25 basis points (to 0.75%). We expect another two rate rises next year (also of 25bps each), consistent with the Bank’s guidance suggesting gradual and limited increases in Bank rate ahead.
Consumer spending has remained weak over the past year, with household budgets caught between sluggish wage growth and high inflation. However, the worst of the consumer squeeze appears to be over: after a year of decline, real wage growth has edged into positive territory over the last couple of months.
The tightness in the labour market should lead to some further improvement in wage growth ahead. In particular, skill shortages remain high across our surveys, and many businesses are raising pay for key roles to both attract new staff and retain their existing workforce. But any further pick up in pay will be tempered by weak productivity, which we expect to persist over our forecast.
As a result, we expect both real wage and household spending growth to remain subdued. The contribution of consumer spending to GDP growth falls by a third in 2018 (to +0.7ppts, from +1.1ppts in 2017), and by a further 40% in 2019 (+0.4ppts).
Business investment fell slightly in Q1 (by 0.2%), after an almost uninterrupted run of growth since the EU referendum. Investment intentions also remain subdued in our business surveys relative to their pre-referendum level (albeit above their long-run averages), as Brexit uncertainty continues to bite hard on spending plans.
However, businesses increasingly report that they’re turning to innovative forms of investment to deal with heightened skill shortages across the economy. A growing number of our members are looking at adoption of artificial intelligence (AI) and robotics, alongside more “intangible” forms of investment such as upskilling and re-training their existing workforce.
Given the growing focus on AI and robotics particularly, we expect a little more strength in business investment relative to our previous forecast. But with Brexit uncertainty still looming large, we still expect growth in business investment to remain weak. Growth averages just 0.3% per quarter over the next year—well below average growth of over 1% per quarter since 2010—and stabilises at 0.4% in the second half of 2019.
There are continued signs that the strength in the global economy and the low pound are supporting UK exports. Net trade registered a substantial positive contribution to GDP in 2017 (+0.6ppts, the highest since 2011), and our April manufacturing survey showed that export orders continued to rise at the fastest pace since the mid-1990s.
Ongoing strength in the global economy should continue to support export growth going forward, and we still expect net trade to lift GDP growth further ahead. On a quarterly basis, the positive contribution wanes a little in the second half of 2019, partly reflecting the impact of previous falls in sterling having peaked. Furthermore, the UK’s trade prospects over the longer-term will be heavily dependent on its new relationship with the EU post the agreed transition period.
CBI on Corporate Governance Reforms: Today Monday 11 June, the government is expected to publish secondary legislation to introduce the following corporate governance reforms.
To help you prepare, we have recorded a podcast, which provides CBI intelligence about what to expect from these proposals.
- A new executive pay ratio for quoted companies (listed in UK, US, EEA)
- A new reporting requirement on stakeholder and employee engagement (all companies with more than 250 employees)
- A new reporting requirement for large private companies (2000 employees or a £200m+ turnover and a £2bn+ balance sheet)
The CBI campaigns team has produced the podcast below, which sets out what we think CBI members can expect from these three reforms.
On 15 June, a consultation on a new voluntary code for private companies will be launched by the Financial Reporting Council (FRC), which links to proposal 3 above.
The CBI has been part of an FRC led working group, helping to draft this new voluntary code. To help members prepare for the consultation Matthew Fell recorded the below podcast with David Styles of the FRC, outlining key information about the draft code.
Food and Drink Health and Safety Awards 2018 – closing date 06 July 2018: Be part of the story and showcase your health and safety solution.
As the closing date of Friday 06 July 2017 approaches for the Food and Drink Health and Safety Awards, we’re encouraging everyone working in the food and drink manufacturing industry to submit their entries.
The annual Food and Drink Health and Safety Awards encourages everyone to share their innovative solutions with peers across the industry.
Whatever your health and safety role or specialism this is your opportunity to showcase what you have done to make your workplace safer and healthier.
The project or solution does not have to be on a large scale – sometimes the most ingenious solutions come from small or niche problems.
Winning entries will receive complimentary entry to The food and drink manufacturing health and safety conference, and will have the opportunity to present to colleagues and delegates at the event. They will also receive a trophy and cash prize presented at the awards dinner, with two nights’ accommodation and up to £500 towards travel expenses.
Share your creative solution and inspire others to take new approaches to improve safety and health at work.
Entry is free and simple. Visit the website to download the entry form.
Closing date for entry is Friday 06 July 2018.
For any questions, please contact Julie.email@example.com or call +44 (0) 116 257 3248
News from HSE
Updating the Manual Handling Assessment Charts (MAC) – Be part of the MAC tool consultation
Following an extensive period of research HSE has revised and updated INDG383 Manual handling assessment charts (the MAC tool) to reflect the latest scientific knowledge and our experience of how the tool is used in the workplace. HSE has also developed an interactive pdf version to encourage wider use and accessibility of the MAC tool. The current version of the MAC tool can be found on the HSE website.
HSE would like your opinions on the new versions before they are finalised. If you would like to participate in the informal consultation (involving 15 questions on content and usability), please send your contact email address to MSDPP@hse.gov.uk. The consultation started at the end of May and runs for 6 weeks.
Slips & Trips
Ensure your business doesn’t slip up
Slips and trips are the most common cause of injury at work, causing 40% of all reported major injuries. HSE’s guide to preventing slips and trips in the workplace describes measures that employers may need to implement to help prevent slips and trips and will also be useful to employees and safety representatives. Visit HSE’s Website to download a copy of Preventing slips and trips at work.
There is also a slips, trips and falls prevention course coming up in June. For further details and to book, visit HSL’s Events Webpages.
Fines and Prosecutions
Grain milling company fined
A grain milling company has been fined £30,000 and ordered to pay costs of £35,000 after a worker lost his right leg after being struck by a fork lift truck. On the day of the incident, the employee attempted to cross the yard to reach some pallets and skips but was struck by a second fork lift truck resulting in injury to his right leg which later required amputation below the knee. More information on the accident and prosecution can be found on HSE’s Press Release.
For more information on managing lift trucks at work, training for operatives and frequently asked questions visit HSE’s Website.
It’s BNF’s Healthy Eating Week. this week. See link for details.
FDF professional affiliates offer services to the food and drink sector; and we want our members to benefit from their knowledge and insight through these webinars.