Economics bulletin 17 March

Spring Budget 2023 – impact on the food industry

The Chancellor of the Exchequer has announced the Spring Budget for 2023. Some of the key measures impacting the food and consumer goods industry include:

• Corporation Tax will rise from 19% to 25% from April 2023
• Businesses will benefit from “full expensing” (i.e. the ability to “write off” capex against Corporation Tax)
• A new tax deduction will be offered to R&D-intensive SMEs
• There are extensive new policies making it easier for various groups to access work and to bring those currently inactive back into the workforce. These measures are aimed at UK residents and do not apply to overseas workers
• Policy measures will support strategically important business sectors including advanced manufacturing

For individuals

• The Energy Price Guarantee will be held at £2,500 until July, before tapering to £3,000 – rather than tapering in April as planned
• Households on pre-payment meters will pay the same fuel prices as direct debit customers
• Most alcohol duty will rise, but draught beer served in pubs will benefit from special concessions
• Tobacco duty will rise
• Plans for childcare support for those with children aged 2 and under
• The tax-free limit for pension savings during a lifetime will be abolished in April
• The annual pension allowance will go up from £40,000 to £60,000 in April
• No major income tax or national insurance giveaway for individuals – tax levels will remain very high for the foreseeable future

See our full analysis video and article of the budget at igd.com/social-impact/economics.

Planning for a weak recovery

The Office for Budget Responsibility has published its latest Economic & Fiscal Outlook report. The key predictions include:

• Growth in 2023 will be weak, but a technical recession will be avoided
• Inflation is expected to fall quite quickly, reaching 2.9% YOY by the end of 2023
• Food price inflation will weaken through 2023, but will remain positive until 2028
• Real household disposable income will fall this year and next year, by around 6%

It is going to be important to think about what issues food businesses need to plan for should a weak recovery occur. Register your place here and be the first to hear our next Viewpoint update: Time to plan for a weak recovery?

Labour market remains robust

New data from ONS shows that the UK labour market remains fairly robust, in spite of increasing economic pressure.

Employment rose slightly in December 2022, reaching 32.8m, although this is still short of the 33.1m seen just before the outbreak of COVID-19.

Unemployment remains low at 3.7% in December 2022 and there is no sign that redundancies are rising.

About 155,000 people have ceased to be economically-inactive since July 2022. See here for more details.

Real pay remains under pressure

New data from ONS has revealed that average pay, including bonuses, in the UK was £630 per week in January 2023, up 5.4% year-on-year. However, living costs are still outpacing inflation, leaving most workers worse-off in real terms.

IGD calculates that “real pay” in January 2023 was about 8% lower year-on-year (using RPI to measure inflation) or about 5% (using CPI). See here for more details.