Dear All,

Detailed below is the Weekly News for 19th February.

Have a good week.

Gordon Polson – Director

Federation of Bakers

SAVE THE DATE: FOB AGM and Annual Conference – Wednesday, 23rd May 2018 at One Great George Street, London SW1P 3AA. Further details will be published soon.

Economic News

Bank of England: Links to Agents’ Summary and Business Conditions.

https://www.bankofengland.co.uk/agents-summary/2018/february-2018

https://www.bankofengland.co.uk/-/media/boe/files/agents-summary/2018/february-2018

-Growth in activity had held steady at a modest pace. Professional services firms had reported a pickup in growth; goods export volumes had strengthened, construction output growth had continued to slow.
-Investment intentions had remained positive, but mainly reflected investment to maintain business activity.
-Recruitment difficulties had remained at an elevated level, and pay growth had picked up.

CBI Economic Update: Bank of england “super Thursday”: hawkers’ bazaar

Stage set for a rate rise in May

Following a rise in interest rates in November 2017, “Super Thursday” last week saw no change in monetary policy from the Bank of England.
However, the tone of the MPC’s communications was increasingly hawkish, and they seemed to be laying the groundwork for another rise in interest rates in May.
Most notably, the Committee judged that were the economy to evolve in line with their expectations, monetary policy would need to be tightened earlier and to a greater extent than anticipated back in November.
It’s unclear what the MPC’s exact expectations for the path of interest rates were in November, but financial markets at the time were expecting around two rate rises over the next three years. Last week’s remarks suggest that the pace of rate rises going forward would exceed this.

Supply side pessimism underpins growing hawkishness

Underpinning the MPC’s hawkishness was a small upgrade to their forecasts for economic growth (see table and chart below).
As a result, the MPC now expect the economy to grow above its potential (i.e. the rate at which the economy can grow without stoking inflation) over their forecast period: the MPC expect GDP growth to average 1.8% over their forecast, running ahead of their estimate of potential growth (1.5%).
This fuels inflationary pressure, thus prompting the MPC’s judgement of a greater tightening in monetary policy ahead.
The latest meeting reinforces the MPC’s growing supply side pessimism: i.e. that years of weak growth in productivity and the capital stock have eroded the UK’s potential growth (it’s worth noting that potential growth of 1.5% is well below pre-crisis norms of around 2.5%).
Indeed, the Bank still expect CPI inflation to be above its 2% target in 2021 (see chart), despite their forecasts being conditioned on a higher path of market interest rates (given that market rates have moved up since the November Inflation Report).
Furthermore, the MPC have shortened their preferred horizon for bringing inflation back to target to 2 years, after extending it to 3 years post-Brexit.

Brexit has a significant bearing on the economic outlook

Aside from the small upgrade to their growth forecasts, there was little change in the Bank’s view of the outlook.
The MPC noted that the UK is benefitting from strong global growth, which is supporting net trade, and business investment has also held up. However, Governor Mark Carney struck a downbeat note on the latter, pointing out that we’re seeing the shallowest investment recovery in half a century.
Furthermore, growth in household spending has halved since the referendum, and the Bank expects it to remain relatively subdued, reflecting the ongoing squeeze on real incomes.
Brexit developments remain the most significant influence on, and source of uncertainty about, the economic outlook. The Bank’s forecasts continue to be conditioned on a range of outcomes for the UK’s trading relationship with the EU, and assume a smooth transition to such an eventual relationship.

Barclays Comment: UK manufacturers confident, but concern about Brexit uncertainty: According to report published by Hennik research, UK manufacturers are poised to take on the world, but are failing to initiate on a bright future because of uncertainties surrounding the outcome of Brexit negotiations and the threatened shortage of skilled workers in the coming decade. Those companies that adopt the latest fourth industrial revolution digital technologies can compete on the world stage but external factor such as Brexit creating uncertainty.

Manufacturer hesitates because they sense a lack of national economic purpose from the centre. It is expected that the government’s anticipated new industrial strategy will resolve that. What will be much more difficult to deal with is the scarcity of skilled recruits coming out of education and via immigration, now and in the future, and the extreme uncertainty caused by Brexit. key statistics as per the report are:

 72.0% of manufacturers have confidence in overseas trade and believes conditions are good for growth, and yet 67.0% believes Brexit is making planning difficult and is damaging business prospects

 71.0% believe apprenticeships are developing into a proper alternative to higher education for school leavers, but a significant number believe the government’s new apprenticeship levy, designed to recruit more apprentices in the coming years, has negative impacted and 59.0% believes it is little more than a tax on employment.

Other news

National Diet and Nutrition Survey(NDNS) and ONS: A team from the ONS has studied the detail of the NDNS data and have found that Britions are eating 50% more food that they admit. Men are consuming 3,119 calories per day not the 2,065 and women 2393 and not the 1,570 they advised NDNS according to the ONS team. Looking at the NDNS data the ONS found that 34% of the 4,500 respondents were eating less than physically necessary to be alive.

CMA Launches Cartel Campaign: The Competition Markets Authority (CMA) today launches a new campaign aimed at raising awareness of cartels and the damage they do to UK businesses and consumers. The campaign not only shares information on what a cartel is and where they can occur, but also what people can do if they suspect breaches in the law. The campaign has launched a website as well as hotlines for those that suspect cartel activity, or have been involved in cartel activity. Take a look at their website for more information.

Board of Trade Food and Drink Ideas Hack: The Department of International Trade (DIT) are running a food and drink themed event for students at the University of Central Lancashire in Preston on 29 March 2018. Approximately 45-50 students will attend and their challenge will be to work in teams to design a new food/drink product and accompanying exporting strategy. DIT are looking for food/drink industry and exporting experts to support the hack as mentors to the teams. If you are interested in participating please contact Lucy Parker at DIT lucy.parker@trade.gov.uk.

Results of GCA Remit Review: The Government has published its outcome from the Groceries Code Adjudicator review. You can read more about the new measures here. BEIS say there is not enough evidence provided to support the extension of the GCA’s remit but announced a Competition and Markets Authority assessment will take place look into whether more grocery retailers should be included. Among the other new measures announced is a £10m ‘collaboration fund’ for farmers, compulsory milk contracts and a vague commitment to work with industry to explore improved transparency on prices along supply chain.

Food Unwrapped: Today Monday 19^th February(Channel 4, 20:30), Kate Quilton challenges Matt Tebbutt to make crumpets, and finds out how the unique holes are created.