Economic News

CBI Economic Update

Manufacturing output growth wanes but stays above average. Manufacturers’ output volumes growth slowed following a robust showing in the previous month, according to the latest CBI Industrial Trends Survey. The survey, of 409 firms, revealed that output growth slowed in the three months to September, but remained above the long-term average. Output expanded in 10 out of 17 sub-sectors, with growth driven predominantly by the mechanical engineering, food, drink & tobacco, plastic products, and metal products sectors. Manufacturers expect output growth to pick up over the next three months. Meanwhile, total order books weakened slightly again but remained well above the long-run average. Export order books also faded a little to their weakest in almost a year, but likewise remained well above the long run average. Expectations for output price inflation remained firmly above the long-run average, while stocks of finished goods remained adequate but below the long-run average.

We expect UK manufacturers to continue benefitting from healthy external demand and a lower sterling exchange rate, but overall economic growth is expected to remain subdued, reflecting weak household income growth and the drag on investment from Brexit uncertainty. For more detail, see our June economic forecast.

Key findings:

20% of manufacturers reported total order books to be above normal, and 20% said they were below normal, giving a rounded balance of -1%
17% of firms said their export order books were above normal, and 13% said they were below normal, giving a rounded balance of +5%
33% of businesses said the volume of output over the past three months was up, and 22% said it was down, giving a balance of +11%
Manufacturers expect output to grow at a faster pace in the coming quarter, with 31% predicting volumes to increase, and 12% expecting a decline, giving a balance of +19%
20% of companies expect average selling prices to increase in the coming three months, with 6% predicting a decrease, giving a rounded balance of +13% (compared with +15% in August)
16% of firms said their present stocks of finished goods were more than adequate, whilst 13% said they were less than adequate, giving a balance of +3%, below the long-run average (+13%).

Latest Economic Update – September 2018:

Official figures for Q2 show that GDP growth picked up slightly after a weather-addled Q1 (to 0.4% from 0.2%)
CBI surveys suggest that growth has been a little higher over the summer, with consumer spending bolstered by the good weather and manufacturing recovering, but underlying conditions remain subdued
Despite a backdrop of heightened skills shortages, wage growth remains tepid and with elevated inflationary pressures, household incomes continue to be squeezed.

Brexit Update

Brexit(1): The CBI has set out its vision for the UK’s post-Brexit immigration system here. Led by an analysis of sector immigration needs, this new report highlights the economic benefits of immigration. The full report can be found here.

Brexit(2): Have your say – The 2018 CBI Preparing for Brexit Survey is now open.

With less than 200 days until the UK’s exit from the EU, we want to know how your organisation is preparing for Brexit.

Over the past year the CBI has used the views of businesses to have a real impact on the Brexit debate, and your perspectives will help inform the CBI’s policy positions ahead of a critical phase in the negotiations.

- It’s easy to participate – Click the link here
- This short 10-minute survey consists of around 20 questions. Reponses will be treated in complete confidence.

The closing date for the survey is Friday 28th of September.

Brexit(3): Ian Wright FDF Chief Executive: Extract from his EU Update: I was profoundly disappointed with this week’s long-awaited report from the Migration Advisory Committee. The Committee seemed to think it had the remit to suggest fundamental changes to the structure of the UK economy. It didn’t: it was created to find a fix for the Government’s perceived problem with immigration into the UK. Westminster politicians of all parties are terrified of voter anger on immigration. That pretty much translates as ‘these people are stealing our jobs and claiming our benefits’. It’s tosh – as so many of our members trying to employ good people for jobs demanding a whole range of aptitudes know only too well.

The trouble is that MPs lack the courage to stand up to the populists. They are scared to point out the real problem. Large parts of the UK don’t have enough people of working age who are available for flexible work. Over the next twenty years the demographics of the UK population will compound this concern. Japan now has one third of its population over 65 and the vast majority of them will live well in the their 80s and 90s. The UK will soon face a similar crunch. A related question which MAC fails to answer effectively is rather nastier: who will be around to clean up when many of us will be incontinent dribbling wrecks in old age?

The solutions outlined by the MAC would restrict our access to the much-needed EU workers, right across the skills spectrum. Obliquely, the MAC suggests that we should automate and increase wages. It seems unlikely that its members have ever been shopping or noticed that our demand for ever cheaper food drives margin and profitability to a point when neither wage expansion nor investment in automation is at all easy.

We all know UK food and drink faces a mammoth skills challenge. It is of the upmost importance that the Government take heed of an industry wide warning and put migration at the forefront of the EU negotiations. Otherwise, the food and drink manufacturing industry simply will not have the power to function at full capacity, and the Great British consumer’s choice will inevitably be eroded.

Other News

WRAP and IGD will be launching a Food Waste Reduction Roadmap on 25^th September. In order for the UK to achieve the national food waste reduction targets under Courtauld 2025 and the UN Sustainable Development Goal 12.3 target, it is essential that businesses Target, Measure and Act on food waste.

Over the last 6 months WRAP and IGD have worked with businesses, trade bodies and others to develop a commitment and Roadmap for widespread and consistent implementation of the principles of Target, Measure, Act. The Food Waste Reduction Roadmap has ambitious and measurable milestones, supported by a range of resources providing clarity on what all large businesses need to do to help halve UK food waste by 2030. The resources, developed through extensive consultation, will enable businesses to measure and report consistently and with confidence, to take targeted action to reduce waste in their own operations, in their supply chain and how they can engage with consumers and innovate to reduce their food waste.

The full range of supporting documents will be published on 25^th September. You will be able to download these, together with the Roadmap and Toolkit here, which will be live from midnight on Monday.

Export Webinar: Researching Export Markets: Food and drink companies are invited to sign up to this year’s annual Open to Export Food and Drink webinar on ‘The importance of researching your export markets’ with the Food and Drink Exporters Association, on Tuesday 16 October from 14:00 – 15:00. This one hour session will cover prioritising your priority export markets, identifying gaps for your products, finding the right distributors for your brand, helping you perfect your pitch to overseas buyers and avoiding costly commercial mistakes. For further information click here.

British Society of Baking Autumn Conference 17-18 October Heythorp Park Hotel, Enstone, Oxfordshire OX7 5UE see attached leaflet for full information.

The 2018 BSB Autumn Conference Leaflet_

FDF Events:

On 11 October, FDF 2018 Nutrition event will take place. Entitled, Feeding Change, the event will explore ongoing work to develop new energy reduction targets, and look at the options that are open to businesses of all sizes who are trying to reduce both energy and sugars. Book your place here.

As the UK’s exit from the EU fast approaches, FDF’s one day event on Future Regulation and Food Safety taking place on 17 October will cover everything you need to know about the future UK regulatory landscape for food and drink. Book your place here