Chief Executive’s Weekly News for 16th December 2019

Dear All,

Detailed below is the Weekly News for 16th December.

This will be the last Weekly News for 2019, see you in 2020.

Have a good week, a successful Christmas period and best wishes for 2020.

 

Gordon Polson – Chief Executive

Federation of Bakers Ltd

CBI UK Outlook(Before General Election): Glimmers of Hope Beset by Risks

Underlying momentum in the UK economy has been muted, held back by the twin headwinds of Brexit uncertainty, and slower global growth. We expect both constraints to wane going forward and as a result, forecast a mild improvement in economic growth. However, risks continue to circle around our forecast – if either slower global growth or Brexit uncertainty become more entrenched, we’d likely see a continued negative impact on activity.

Key highlights from our economic forecast:

  • Household spending remains a mainstay of economic growth, supported by further rises in real wages. But with the labour market softening and wage growth likely to have peaked, consumer fundamentals are looking a little softer around the edges
  • Business investment picks up further ahead, particularly in 2021, as the near-term uncertainty over Brexit fades. This allows GDP growth to get on to a firmer footing, albeit remaining low by pre-crisis norms.
  • The global outlook is set to improve, driving a pick up in UK export growth. But this is offset by firmer imports growth, due to better domestic demand. As a result, growth largely remains domestically-driven throughout our forecast.
  • A key risk to our forecast is continued uncertainty around Brexit dampening activity. Under a scenario where uncertainty persists throughout our forecast period, we expect GDP growth to be a little weaker, as business investment is further hit.
  • The threat of a no-deal Brexit also continues to loom, and its realisation would result in a much more significant hit to activity, sentiment and financial markets.

Barclays Update; UK election results: Prime Minister Boris Johnson wins with majority

Prime Minister Boris Johnson has won the UK general election with a majority for the Conservatives party. The victory is expected to bring relative stability on Brexit and to the British economy. This will be a welcome news for investors who are waiting in the wings for some clarity from British politics about the direction it would take the economy. It is now expected that Boris Johnson’s Brexit deal will be signed off by the end of jan’20.

Negotiations over the future relationship with the EU will be tough and will likely go through some turbulent moments. The main point is that there is now an agreed direction of travel for Brexit. Prime Minister has a strong mandate from the British people to get Brexit done. The British pound increased 2% after the exit polls pointed to Conservative majority and has held the gains since the results confirmed it. The big moves in the currency markets build on the already substantive gains for the pound since the election was called.

The ftse 100 looks set to open higher after some volatile trading in overnight futures. The prospect of a better business environment for UK-listed companies is offsetting the devaluation of overseas earnings from a stronger currency.

Outside of the UK, sentiment has been rising thanks to newfound optimism that the us can sign a phase one trade deal with China. Wall Street hit record highs in response to a tweet from President Trump. According to US sources, the deal has been agreed on both sides and just needs a sign-off from the US President. The prospect of a deal had seemingly dimmed on reports that the US would only delay new tariffs that are supposed to start from 15th dec’19. If the deal gets official confirmation, then some extra gains in global markets is expected. Rolling back tariffs in exchange for buying more agricultural products is not expected to fix any of the big trade issues. From a markets standpoint a phase one deal would just improve the chance of a global economic rebound in 2020.

 

Government Inaction Provides Chances for Food Firms

According to kantar, c.77% of UK grocery shoppers had switched, avoided or boycotted buying certain products, or might consider doing so in the future, based on brands’ environmental policies. The report also identified key areas such as global warming, plastic problems and buying decisions, which have affected consumers’ views. Brand loyalty was lowest among the people aged 16 to 24 years, with 87% stating that they had switched or might do so. Responses differed considerably among generations too, with 40% of millennials stating that they had avoided buying, or decided to choose a different brand over the last 12 months, compared to only 9% of baby boomers. However, 46% of generation ageing between 55 to 65 years and above indicated that they had not switched or boycotted brands in 2018 due to their environmental credentials but they might consider doing so in the future. Mark Chamberlain, Brand Managing Director stated that food firms are benefited from greater trust than many other sectors, but should not become complacent.

The Association of Chief Trading Standards Officers (ACTSO) has published a report on the value of local Trading Standards services. For the first time, ACTSO has developed a method to assess the value that local Trading Standard services deliver. The report, based on data from 108 out of 168 local authority Trading Standard services, highlights the value of the work they provide. It consists of three chapters: Tackling detriment and preventing harm; Supporting the local economy and Promoting health and wellbeing.