Director’s Weekly News – 11th February 2019

Posted on February 11, 2019 by admin - Chief Executive's Blog

Dear All,

Detailed below is the Weekly News for 11th February.

Please look at the link for the AIBI Congress in Manchester http://www.aibi-congress2019.co.uk/ and make sure you reserve your places in plenty of time.

It is an exciting speakers programme with good supporting events for delegates and partners.

It will be an excellent networking event for everyone associated with any aspect of the bakery supply chain.

If you have any questions please get in touch.

Gordon Polson

Director – Federation of Bakers

Economic News

UK GDP: The UK economy expanded at its slowest annual rate in six years in 2018 after a sharp contraction in December.

Growth in the year was 1.4%, down from 1.8% in 2017 and the slowest rate since 2012, the Office for National Statistics (ONS) said.

The ONS blamed falls in factory output and car production for the slowdown, among other factors.

It follows forecasts of slower growth in 2019 due to Brexit uncertainty and a weaker global economy.

According to the ONS, quarterly growth also slowed, falling to 0.2% in the three months to December – down from 0.6% in the three months to September.

Head of GDP at the ONS, Rob Kent-Smith said: “GDP slowed in the last three months of the year with the manufacturing of cars and steel products seeing steep falls and construction also declining.

“However, services continued to grow with the health sector, management consultants and IT all doing well.”

CBI Economic Update: Fog of Brexit” and global slowdown weigh on MPC’s outlook…

  • “Super Thursday” saw the Bank of England’s Monetary Policy Committee (MPC) vote unanimously (9-0) to maintain rates at 0.75%. The decision to keep monetary policy unchanged was in line with consensus expectations.
  • The MPC’s forecast for GDP growth was downgraded in the near term due to greater Brexit uncertainty and weaker global economic activity. In the event of a smooth Brexit outcome, growth is expected to recover towards the end of the forecast period (2021) as uncertainty fades and looser fiscal policy supports domestic spending.
  • The Bank also expect lower inflation in the near-term due to the recent fall in global oil prices. However, the MPC remained vocal about domestic cost pressures firming, and their medium-term outlook for inflation was largely unchanged; as the effect of lower prices fades away and domestic demand exceeds the subdued rate of supply growth.
    • As a result, a “smooth” Brexit outcome would imply that the MPC’s current guidance on the future path of rate rises remains unchanged: i.e. an ongoing tightening in monetary policy will be necessary to return inflation to target, assuming that the economy continues to evolve in line with the MPC’s forecast.
    • The MPC were more tight-lipped about prospects for monetary policy in the event of uncertainty persisting for longer than expected, or a no-deal Brexit. In the event of the latter, the MPC have previously stated that they would either increase or decrease interest rates depending on how Brexit affects the economy (specifically, on the balance of how much demand hit is affected relative to supply potential)
  • The Bank’s forecasts remained conditioned on a range of outcomes for the UK’s future relationship with the EU, and they assume a smooth transition to such an eventual relationship. Their work on the economic impact of a more disruptive “no deal” Brexit can be found here.

 

BoE more downbeat on the outlook

  • The MPC suggested that the recent slowdown in UK growth largely reflected Brexit uncertainty and softer global economic activity
  • Due to the weaker recent economic data and stronger-than-expected impact of uncertainty on activity, the MPC downgraded its forecast for UK GDP growth in 2019 and 2020 to 1.2% (from 1.7%) and 1.5% (from 1.7%), respectively
  • A noticeable part of this downgrade was driven by weaker business investment. Specifically, the MPC forecast business investment dropping in 2019 (-2.8%), compared to expectations for modest growth (of 2%) in its November forecast
  • In the medium-term, though, the MPC expects growth to pick up again as Brexit uncertainty fades – which unlocks pent-up business investment – and looser fiscal policy (following announcements in the Autumn Budget) supports domestic spending. Consequently, GDP growth in 2021 was upgraded to 1.9% from 1.7%.

Inflation forecast downgraded in near-term

  • The Bank expect lower CPI inflation in the near-term, with inflation (temporarily) falling below the 2% target in the next few quarters, largely due to the recent drop in global oil prices
  • However, across the forecast period, the Bank expects inflation to firm up again to slightly above-target rates, as domestic cost pressures build, and the economy grows faster than its potential
  • Consequently, the MPC stated that the path of monetary policy going forward will continue to tighten at a “gradual pace and to a limited extent”.

Bank of England: This link gives full details of the Banks latest inflation report https://www.bankofengland.co.uk/inflation-report/2019/february-2019

FDF Brexit Update Last week we saw the Commons agree – but only in the softest of terms – that it doesn’t want a ‘no-deal’ Brexit. It is assumed that this gentle shot across Mrs May’s bows might harden the nearer we get to the March 29th deadline.

However, even strongly-expressed opinion from Parliament doesn’t alter the legal default that we exit on 29th March. Only statute law can reverse statute law. For that to happen, the Speaker would need to go even further in granting new rights to backbench MPs.

Of course we all hope that next week’s motion, amendments and votes will bring clarity, but there’s precious little evidence on which to base our hope. Divisions within the governing party remain stark. The EU remains united and unmoving.

Whatever happens on 14th, Ian Wright will be hosting another Brexit webinar the following day (Friday 15 February – sign-up details below), where we will do our best to explain what’s going on.

Preparations for ‘no-deal’, across companies, government and trade associations such as FDF, are becoming ever-more intense. The long-awaited advice on food labelling in the event of a ‘no-deal’ was published by DEFRA on Tuesday. We have heard from various Government sources that there will be guidance published in the next week on what we can expect to happen with the existing EU preferential trade agreements, if these agreements cannot be rolled over before 29th March. We believe a decision on UK bound tariffs in the event of ‘no-deal’ will be published soon.

But even if all these questions were answered, it is clear that no-one is truly ready for a ‘no-deal’ Brexit. Ian once described the prospect as, “Grisly” and I’ve yet to hear a more apt word. (Hilariously, this was reported by one media outlet as ‘grizzly’, which sometimes describes Ian, but rather misses his point!)

CBI Brexit Update: This week the Prime Minister has been to Northern Ireland and Brussels as she seeks to renegotiate her Brexit deal. Meanwhile, the CBI has continued to underline the dangers of a no deal Brexit and has highlighted the hugely damaging implications for the UK of crashing out of trade deals it belongs to through membership of the EU.

The Prime Minister seeks changes to the backstop

Following the House of Commons’ rejection of the Prime Minister’s deal, the CBI has been clear that any changes to the deal must pass three tests: a deal that protects our economy, commands majority support in Parliament and a deal that is negotiable with the EU. Critically, the business community is clear that a March no deal must be avoided at all costs.

Read the CBI’s full reaction to last week’s vote

With a March no deal drawing closer and with an accidental “no deal” Brexit becoming more likely, the CBI’s President, John Allan, sounded the alarm on the hugely damaging implications for the UK of crashing out of 40 trade agreements spanning five continents it belongs to through EU membership. Such EU Free Trade Agreements have supported firms of all sizes to grow and could be lost overnight and include the rapidly growing creative firms trading with South Korea and specialist machinery firms trading with Mexico.

Read John Allan’s intervention on the need for continuity of non-EU Trade deals

Guidance in Event of a No Deal Brexit

A number of Government departments have published updated guidance on the following areas, if the UK leaves the EU in March 2019 with no withdrawal deal:

  • • Importing and exporting plants and plant products;
  • • Trademarks and designs if there’s no Brexit deal;
  • • Intellectual Property and Brexit: the facts;
  • • Approval and operation of Plant Health Inspection Facilities at Place of First Arrival if there’s no Brexit deal;
  • • How to comply with REACH chemical regulations; and
  • • How to comply with pesticide regulations after Brexit.

Other News

Food Standards Agency: Heather Hancock will remain Chair of the Food Standard Agency’s (FSA) Board for a further three years. The reappointment, made by the Secretary of State for Health and Social Care, Matt Hancock, will run until the end of March 2022

Advice on food & drink labelling post Brexit

The Government has issued updated guidance on food and drink labelling in the event of a no deal Brexit.  Defra has advised that in the event of no deal Brexit there are some from day one technical changes to labels that will be required. For products placed on the UK market after 29 March 2019, these changes include: not using the EU emblem on goods produced in the UK unless a company has been authorised by the EU to do so; and not labelling UK food as “origin EU”. The EU organic logo must not be used on any UK organic products, unless the UK and EU reach an equivalency arrangement before the UK leaves.  However, food and drink products that have already been placed on the UK market on or before 29 March 2019 can continue to be sold until stocks are exhausted.  The UK Government will also encourage enforcement officers to take a “pragmatic approach” to enforcement of these technical rule changes given the scale of labelling changes required.  In order to satisfy other countries, the Government suggests UK food labels are replaced or over-stickered as required to ensure that they are fully accurate.  Overall the Government has concluded that its proposals for food labelling after Brexit “meet the needs of food businesses for a realistic transition period, while also protecting consumers’ interests in a ‘no deal’ scenario.” In addition to publishing the Government response to the consultation it ran between 6 November and 5 December 2018 it has published a summary of responses received from stakeholders.

Government to consult on changes to UK food labelling later in 2019
The Government has confirmed that it will consult on UK wide food labelling later this year after announcing that it expects to respond next month to its now closed consultation on food, mineral water and honey labelling. That consultation covered changes to current legislation to ensure that it continues to work after the UK has left the EU if a partnership arrangement and common approach to food legislation is not agreed with the EU.

 

Statutory Instruments & updated general advice for business
Meanwhile the Government continues to publish Statutory Instruments to provide more cover for a “no deal” Brexit.  In most cases these simply revoke certain provisions relating to EU legislation that will cease to apply on “exit day” and address omissions or failings in domestic legislation and other deficiencies arising from the withdrawal of the UK from the EU; they do not make substantive changes to policy. The Organic Products (Amendment) (EU Exit) Regulations 2019 and The Quick-frozen Foodstuffs (Amendment) (EU Exit) Regulations 2019 are examples of this

s approach. The Government has also updated its advice for businesses on importing, exporting and transporting products or goods after Brexit, noting that “when the UK leaves the EU there may be changes to UK-EU trade at the UK border including on customs, tariffs, VAT, safety and security, documentation, vehicle standards, and controlled products.” This includes an updated “partnership pack”.

 

FSA publishes latest Public Attitudes Tracker results

The Food Standards Agency (FSA) has published the latest results (November 2018) of its Public Attitudes Tracker survey, which monitors changes in consumer attitudes to food-related issues in England, Wales and Northern Ireland. The top food safety issues of concern for those surveyed were: food hygiene when eating out (35%); food poisoning (29%); chemicals from the environment, such as lead, in food (28%); and food additives (28%).  The top wider food issues of concern were: the amount of sugar in food (50%); food waste (49%); food prices (46%); and animal welfare (43%).