CEO’s Post for 12th August 2019

CBI: Highlights from this month’s economic snapshot include:

• Our latest economic forecast predicts 1.4% of growth in the UK economy in 2019, and 1.5% growth in 2020
• There’s been a shift in the drivers of growth – with increases in wages and household spending supporting growth
• There’s been a continuing decline in business investment, due to the uncertainty around Brexit
• No deal is still a very real risk – and we’re working hard to help prepare our members for this potential eventuality
• We’re engaging with the new Chancellor, Sajid Javid on his approach to the economy.

See full details here https://cbicdnend.azureedge.net/media/3179/2019-economy-in-brief-august.pdf?v=20190808.1

Barclays Economic Comment: The total increase in recurrent spending is likely to reach £30.0bn. This is in addition to £10.0bn of spending on no-deal Brexit preparations, towns’ fund as well as bigger infrastructure projects such as nationwide broadband. The office for budget responsibility (OBR) standardised estimates of the fiscal multipliers suggested that such a package would have a very underwhelming effect on growth as, unlike investment spending short-term tax cuts or even government consumption are not immensely efficient at prompting growth. Two thirds of the £30.0bn increase in spending will come through changes in personal taxation, which carry a multiplier of only 0.3x, and the weighted average multiplier of the entire spending package (excluding infrastructure projects) is below 0.5x.

The Bank of England (BOE) adjusted its central case of Brexit while refusing to discuss a no-deal scenario, even though the latter is now perceived by markets to be much more than just a tail risk. Consequently, the bank’s communication is being challenged because it employs a forecasting framework that takes asset prices from the markets, which are currently incompatible with a positive Brexit assumption. Since the May’19 inflation report, the exchange rate has stood lower at -4.0% while interest rate markets had a cut of 25bp by 2020.

In jul’19, the manufacturing sector remained in recession territory, which was in line with the global industrial slowdown and despite some support from renewed Brexit contingency planning pushing up inventory levels. The ihs⁄markit survey suggested that while some companies are running down inventories, others are maintaining or rebuilding high levels of stock in anticipation of a possible no-deal in oct’19. However, Brexit has also led to some overseas clients routing supply chains away from the UK, reducing structural demand for UK manufactured goods. According to SMMT (Society for Motor Manufacturers and Traders), investment in the first six months of 2019 decreased to £90.0m from £330.0m for the same period 2018. Additionally, households were generally more confident, revising up their overall assessment of personal financial situation, saving and purchase intention, while the general economic outlook over the last 12 months is unchanged.

Barclays Brexit Comment: The government is planning to create up to 10 free ports across the UK after Brexit. They allow firms to import goods and then re-export them outside normal tax and customs rules. The UK last had such zones in 2012 and prime minister Boris Johnson believed they could create jobs in left-behind areas. Labour said that the move involved no new investment and could attract money launderers and tax dodgers. Seaports and airports will be able to apply for free port status, to be set up after the UK is due to leave the EU on 31st oct’19. Such zones are allowed under EU law, although backers argue the benefits would be greater after Brexit if the UK is allowed to diverge from EU rules.

Liz Truss, the international trade secretary stated that the move would create thousands of jobs. Further, she added that freedoms transformed London’s docklands in the 1980s, and free ports will do the same for towns and cities across the UK. Also, UKs prime minister backed the creation of new free ports as a tory leadership candidate, suggesting there should be about six around the country. Around 135 countries have free trade zones totalling 3,500 worldwide. The UK had seven of them at various points between 1984 and 2012, when the legislation establishing them was not renewed. They included Liverpool, Southampton, the Port of Tilbury, the Port of Sheerness and Prestwick airport

WRAP: Latest Initiative-Spoiled Rotten:

Partner slides – all about the campaign: https://partners.wrap.org.uk/assets/11266/

Spoiled Rotten collection – all  the assets partners need to support it: https://partners.wrap.org.uk/collections/247/

Partner toolkit – info on what assets are available and suggested social media copy: https://partners.wrap.org.uk/assets/11283/

The website is live at www.lovefoodhatewaste.com/spoiledrotten and we would really appreciate partners continuing to get behind the campaign into August (albeit our paid media campaign has ended now).

Next up, we will launch the next Spoiled Rotten ‘moment’ on 7 October and that will  be all about food storage – invites will be coming out for a webinar in September, but if brands can get the date in the diary that would be great – food storage will be the focus up until xmas.

FDF Events:

Plastics and packaging is one of the biggest issues currently facing the food and drink industry. Join our excellent panel of speakers on 10 October to discuss new technology and innovation, how businesses can improve their footprint, and the new regulatory and legal challenges that are ahead. Register your interest here.

The Food Safety Conference on 19 November is an unmissable event for those in the technical and regulatory world of food and drink. Each year, our expert speakers tackle the biggest issues facing our industry, discuss new technologies, and look at future opportunities.