Director’s Weekly News – 16th October 2017

Dear All,

The Weekly News is brief this week and a day late.

Have a good week.

Gordon Polson – Director

CBI Economic Update

PMI and CBI survey data point to steady growth. Business surveys point to economic momentum having remained steady over the third quarter.

Industrial production rose by 0.2% on the month in August, in line with consensus expectations and broadly similar to growth of 0.3% in July. The main contribution to growth came from a rise of 0.4% in manufacturing (manufacturing accounts for 70% of industrial production).

Construction output rose by 0.6% on the month, the strongest rise since March 2017, though not enough to offset a sharp decline of 1.0% in July. However, the underlying trend in both new work and repair and maintenance remains negative, with overall construction output falling 0.8% on a 3-month on 3-month basis.

Turning to more recent survey data, IHS Markit’s composite PMI stood at 54.1 in September, broadly steady on the previous month (54.0). This reading indicates that the economy remains firmly in expansionary territory. However, there was some variation by sector. Slower activity was reported in the manufacturing sector (56.7 from 55.9 in August), and business activity in construction fell for the first time in over a year (48.1 from 51.1 in August). In contrast, the pace of growth in the services sector edged slightly higher (53.6 from 53.2 in August). There were also widespread reports of higher input costs, driven by rising commodity prices and higher costs for imported items.

September’s PMIs chime with the CBI’s Growth Indicator, which showed stable growth in private sector activity over the three months to September (+11% from +14% in August). The outlook for growth remains strong with firms expecting growth to pick up over the next three months (+18%). Business surveys generally have pointed to firmer economic growth than official GDP data since the start of the year – with little change in both the PMI and our growth indicator in Q3, it remains to be seen whether this discrepancy has persisted into the second half of 2017.

Elsewhere, the Office for National Statistics (ONS) released some large revisions to national accounts data as part of the release of their annual Blue Book. While the UK’s “growth story” was largely unchanged, key changes included an upward revision to the household savings ratio, which is now believed to have been significantly higher than previously estimated (due to the inclusion of new data on household income from dividends). This suggests a little more upside risk to household spending ahead: in the face of an ongoing squeeze on real earnings, consumers may have more scope to reduce savings to finance spending.

However, the UK’s current account deficit is now estimated to be larger, hitting a record low of around 6.0% of GDP in 2016 (compared with 4.4% previously), before narrowing to 4.6% in Q2 2017. A larger current account deficit is a concern to the extent that it leaves the UK economy more vulnerable to a weakening in capital inflows – something that is a growing worry following Brexit.

European Commission continues action against food waste and food poverty by facilitating food donation: The Commission has adopted guidelines to facilitate food donation in the EU, a key deliverable of the Circular Economy Action Plan. The aim is to clarify relevant EU legislation and help lift barriers to food donation. The EU guidelines will help donors and recipients of surplus food to make sure that they respect relevant requirements such as food hygiene and food information to consumers, thereby ensuring safe food donation practices. The guidelines also promote common interpretation of EU rules applicable to food donation, including those related to VAT. Welcoming the adoption, Vytenis Andriukaitis, European Commissioner for Health and Food Safety, said: “I am particularly happy that today, on the occasion of the World Food Day, we have a good news to report. In EU around 550.000 tons of food are redistributed to 6.1 million people by food banks in the EU, but that’s only a fraction of the estimated volume of food which could be redistributed to prevent food waste and help fight food poverty. I am convinced that the guidelines adopted today will not only help industry and charity organisations to make their job easier and hence provide to those in greatest need but also become a reference for national authorities and operators to facilitate food donation in the EU”. The EU guidelines were developed by the Commission in close cooperation with the members of the EU Platform on Food Losses and Food Waste bringing together Member States, international organisations, industry, food banks and other charity organisations. The Commission notice, EU guidelines on food donation, is available here. (For more information: Anca Paduraru – Tel.: +32 229 91269; Aikaterini Apostola – Tel.: +32 229 87624) 

 Federation of Bakers Signs Up To Courtauld 2025:

What is Courtauld 2025?

The Courtauld Commitment 2025 is an ambitious voluntary agreement that will bring together organisations across the food system – from producer to consumer – to make food and drink production and consumption more sustainable.

At its heart is a ten-year commitment and programme of work to identify priorities, develop solutions and implement changes at scale – both within signatory organisations and spreading new best practice across the UK.

Why do we need it?

It is widely recognised that we need to drive a step change in the sustainable production and consumption of food and drink. Demand is rising, both in the UK and globally, and the UK food and drink supply chain will be subject to increasing volatility as resource scarcity increases and the impacts of climate change take greater effect.

This is recognised globally, for example through the adoption of UN Sustainable Development Goals to increase sustainable production and consumption, conserve resources and combat climate change. Consumers increasingly care about these issues too. The Food Standards Agency, for example, recently reported that food waste is one of the most frequently mentioned food issues of concern.

Against this backdrop, there are opportunities for all businesses across the value chain – from farm to fork – to tackle resource use & waste, improve profitability, respond to supply risks, provide innovative solutions, be more competitive and provide quality products with lower impacts.

How can the Courtauld 2025 approach help? What’s different?

For many organisations, the easy efficiency improvements have already been realised, leaving some big challenges. Many of these are things that neither businesses, nor individual stages of the food chain, can tackle alone. For example we know that reducing waste at one stage of the value chain can just shift the problem elsewhere.

Courtauld 2025 will focus on these big challenges and support collaborations that deliver better overall outcomes. This means working with organisations across the value chain, including individual business, sector bodies and trade associations, waste management companies, research and academic organisations, national and local governments, consumer groups and consumers themselves.

WRAP is an independent organisation that facilitates and catalyses change. We develop the evidence to guide and support collaborative action. We have a core and practical focus on delivery – carefully evaluating what works and continuously seeking the best ways of supporting change.

Key elements of the Courtauld 2025 approach are:

An evidence-based work programme tackling the biggest issues and opportunities. This will be focused on those areas that research has shown to be key drivers of change (below). Within each, we will work collectively to develop and implement best practices.

Ambitious targets and a systematic way to track progress. Courtauld 2025 has an overarching ambition to cut resource use in producing, delivering, preparing and storing food and drink consumed in the UK by 1/5th. We have developed national-level targets and a monitoring framework so that we can track and monitor progress.

Strong and representative governance – to ensure that the work programme maintains focus in the right areas and produces outputs that are fit for purpose. Key to this is having representation from across the food system – from producer to consumer.

A commitment to work equitably, for example adhering to the principles outlined in the Groceries Supply Code of Practice.

There is evidence that this approach works. Courtauld 2025 will build on the successful track record of the Courtauld Commitment and Hospitality and Food Service Agreement to date. For example, between 2010 and 2012, Courtauld phase 2 prevented 1.7Mt of waste across the UK, delivering 5Mt of carbon saving and £3bn cost savings. Courtauld 2025 will build on this momentum and increase its reach. There is a role for, and opportunities for, all supply chain businesses – not just the large players. For example, raw material and packaging companies can provide innovative solutions to tackle challenges. Producers can have a competitive edge by being more resource efficient at a time where resources are becoming scarcer and prices more volatile. And all businesses can benefit from consumers having a better understanding of the value of their food.

For further information please contact courtauld2025@wrap.org.uk