Director’s Weekly News – 15th January 2018

 

Economic News

CBI Monthly Economic News Jan 2018

  • Q3 GDP growth rate was unrevised in its final estimate at 0.4%. However, revisions to the composition of growth left it looking more balanced over the quarter
  • Employment continued to fall in the three months to October, but the labour market remains relatively tight
  • The CBI’s growth indicator rose above its long-run average to +19% in December.

 

Economic growth steady but subdued in Q3…

The ONS’s final estimate of Q3 GDP growth was unrevised at 0.4%, continuing the pattern of steady but subdued momentum seen since the start of 2017. However, the ONS’ revisions to the composition of growth left it looking more balanced over the quarter, with the breakdown showing a stronger contribution from business investment and exports.

However, while growth in household spending picked up in Q3, real incomes are still under pressure with consumers financing spending by running down their savings. Credit risk as interest rates start to rise is being monitored, but there are few signs that credit growth is unsustainable yet: recent research by the Bank of England and published in their Bank Underground blog finds that recent credit growth has been driven by borrowers with the highest credit scores, i.e. those least likely to suffer financial distress.

…while labour market softens in quarter to October

Employment fell by 56,000 to 32 million in the quarter to October according to Labour Market data from the ONS. Although this marks the second consecutive rolling quarter of falling employment, it follows a long run of strong growth and leaves the employment rate at 75.1%, down slightly from its recent high of 75.3%. Furthermore, the labour market remains relative tight, with the unemployment rate unchanged at 4.3%, the lowest since 1975.

But while wage growth (excluding bonuses) rose by 2.3% on the year in the three months to October, it continued to run well below CPI inflation (3.1% in November, up from 3.0% in October), meaning that real wages continued to fall, further underlining the challenging conditions facing households.

Survey data suggests surge in activity at year end…

The CBI’s growth indicator picked up sharply in December to its highest in two years, reflecting a broad-based pick-up in private sector activity. Manufacturing output growth remained at a brisk pace, while there was an improvement in growth among consumer-facing companies and retailers – albeit to a lesser degree than expected in the case of the latter. Meanwhile, growth also improved among business and professional services firms.

Despite strong data for December, the average for the growth indicator over Q4 was a little below that for Q3 (balance of 12% vs 14%), driven lower by a particularly weak reading for November. So our surveys imply little change in overall momentum in Q4 relative to Q3.

…but outlook remains subdued

Expectations from December’s CBI surveys for the quarter ahead are weaker than those for November, despite the pick-up in growth recorded (with an expectations balance of +4% – the weakest since just after the referendum result in July 2016).

We expect growth to remain at around 0.4% per quarter over the next few years, yielding annual growth of 1.5% in 2018 and 1.3% in 2019 (see CBI December 2017 forecast). Consumer incomes will remain under pressure during 2018 as inflation remains elevated and earnings struggle to keep pace, affecting consumer-facing companies and retailers, and uncertainty will contain to constrain investment spending. We expect export growth to pick up further, but not to a sufficient degree to fully compensate for the slowdown in consumer spending and investment, which together account for three quarters of the economy.

Other News

Food manufacturer Top Food Trends for 2018: include global sourcing according to a report by eurostar commodities, global sourcing and vegan products are of the top 10 UK food trends. The food trends also include:

  • Brexit to drive global sourcing: brexit will focus food manufacturers’ attention on global sourcing in 2018, in preparation for a hard brexit, many firms and are seeking supply chains with commonwealth countries
  • Vegan is to outpace organic: the popularity of vegan products would outpace organic products in 2018. The rise in the number of vegan products consumed by the British public has been driven by brands such as pret a manger
  • demand for lupin beans: lupin beans are traditionally eaten as a pickled snack food, primarily in the mediterranean basin and latin america, and have been reported to lower blood pressure, improve insulin sensitivity and appetite control
  • turmeric as a key ingredients: turmeric will become a key ingredient in 2018, as consumers turn to the spice for its medicinal properties and a source of antioxidants
  • healthy snacks boom: 2018 expected to see a healthy snacks boom, as the British public turn away from snacks high in sugar, salt and saturated fats
  • increase in green and purple pizza: rise in pizzas made with healthier ingredients, as consumers become health conscious
  • rise in asian fusion cuisine: as a healthier dinner options and the ready availability of core asian ingredients on the high street will bring these dishes into people’s homes
  • health benefits of brown rice: UK consumers are turning to brown rice as a healthy carbohydrate to serve with a number of meals as part of healthier diets
  • pizza for breakfast: the potential to create a pizza for breakfast as it offers the right nutrition levels that are required at breakfast time. 

CBI Update on Brexit: The agreement of ‘sufficient progress’ in the Brexit negotiations at the European Council meeting before Christmas provided a welcome indicator that the talks are going in the right direction. However, CBI members have been clear that much more is needed to make a success of Brexit, and that is the message the CBI will be taking into Government in the weeks ahead.

The first step is for the agreement on sufficient progress to be translated into a legal text on which a formal withdrawal agreement will be based. Then, at the end of January, negotiations are due to begin on the planned transition period. The CBI will work with negotiators on both sides to secure as much certainty as possible for businesses from March 2019.
From March this year, talks will move on to the future economic relationship between the UK and EU. It is anticipated that Prime Minister Theresa May will deliver her third big speech on Brexit (after the Lancaster House and Florence speeches in 2017) at the end of January, to provide greater clarity on the Government’s vision for the final deal. This will help shape the work that the EU negotiating team is doing in member state capitals, to ensure individual EU countries’ priorities are represented in the talks ahead. The CBI will continue working with Government to ensure the business view is represented.

Enzymes – EFSA Evaluation of Peroxidase from Soybean Hulls: EFSA’s CEF Panel published on 21 December 2017 a Scientific Opinion on its safety evaluation of the food enzyme peroxidase obtained from soybean (Glycine max) hulls.

The Panel concluded that this food enzyme does not give rise to safety concerns under the intended conditions of use. However, the Panel noted that this food enzyme may contain allergenic soybean proteins, thus, adverse reactions in susceptible soybean-allergic individuals cannot be ruled out.

EFSA Re-Evaluation of Polyglycerol Esters of Fatty Acids:  EFSA’s ANS Panel published on 20 December 2017 a Scientific Opinion on its re-evaluation of polyglycerol esters of fatty acids (E 475) as a food additive.

The Panel concluded that the food additive PEFA (E 475) was not of safety concern at the reported uses and use levels and that there was no need for a numerical ADI

FSA Update on Food Contaminants :The FSA published on 19 December 2017 an update on rapidly developing policy on food contaminants covering salient issues that have recently been discussed at European Commission working group meetings and Standing Committees.

Subjects include:

  • Pyrrolizidine alkaloids – the Commission has proposed that risk management actions are undertaken in order to reduce possible risks to consumers and various regulatory measures including setting maximum levels for various foods are being discussed;
  • Ergot alkaloids – the Commission has started discussions on appropriate risk management actions and one of the proposals is to set maximum levels for various cereal-based products
  • Ochratoxin A – the Commission has initiated discussion on maximum levels for foods which currently do not have a maximum level such as sunflower seeds, herbs, tea and herbal infusions and cocoa powder;
  • Erucic acid – reviewed levels for vegetable oils and fats, infant and follow-on formulae, mustard oil and mustard will be sent for stakeholder consultation shortly;
  • Acrylamide – the Commission is working on guidance on the application of the new legislation which should be finalised by January and discussions are expected to start on a future monitoring recommendation for gathering data mainly on acrylamide levels in foods not within the scope of the Regulation. The Commission will also start discussions to consider whether maximum levels could be set for certain types of food;
  • Perchlorate: the Commission is looking at setting maximum levels to replace the current levels for intracommunity trade and initial discussions on possible maximum levels have started;
  • Seaweed monitoring recommendation: the proposed Commission Recommendation on the monitoring of metals and iodine in seaweed was further discussed and is expected to formally agreed in January. 

PHE Clarification on Calorie Campaign: PHE published on 28 December 2017 a news item concerning clarification of recent media coverage on its upcoming calorie campaign. The government dietary recommendations on how many calories the population should consume in a day to maintain a healthy weight have not changed. The recommendation is still that women should aim to consume 2,000 calories a day from food and drink, men should aim for 2,500.

HEALTH & SAFETY : Occupational Health – Workplace Ill-health in Food Manufacturing: The HSE published on 2 January 2018 its programme of inspections intended to target the causes of workplace ill-health. The food manufacturing industry was warned that unannounced inspections would take place focussing on two of the current main causes of ill-health in the sector. These are occupational asthma from exposure to flour dust in bakeries, cake and biscuit manufacturers and grain mills; and musculoskeletal disorders – predominantly lower back pain and upper limb disorders from manual handling activities and repetitive tasks across the sector.

EFSA draft protocol for a scientific opinion on free sugars from all dietary sources: EFSA has published a draft protocol for the Scientific Opinion on free sugars from all dietary sources. The consultation is open until 4 March 2018.EFSA will be hosting a technical meeting with interested stakeholders on 13 February 2018 in Brussels, which will discuss the methodology that will be applied to the scientific assessment. The aim of the assessment is to establish a cut-off value for intake of free sugars that is not associated with adverse health effects. EFSA is expected to provide its scientific advice by September 2020.

 

FDF Events:

Spotlight on Social Media 6th February

Run by LUX, The Food & Drink Agency, this course is designed specifically for food and drink businesses involved in social media.  It is designed to explore current trends and topics impacting the social media space, providing a comprehensive understanding of the opportunities it presents.  More information here.

GSCOP 7th February

Back for the second year, the Groceries Supply Code of Practice training course is great for those in positions such as sales, buying, purchasing or anyone involved with the supply of goods to retailers.  It will give you the best understanding of the codes implications and ensure you are treated fairly in the market.  More information here.

Cyber Security 22nd February

Presented by an impressive line-up of speakers, including representatives from British Standards Institution, Finn Communications, Squire Patton Boggs and others, this event will provide you with information to safeguard your company from security risks.  Those in production and operations, legal or corporate affairs teams will find this event useful to ensure your product information and company’s confidences are protected.  More information here.