Economics bulletin 23 September

Date : 23 September 2022

Your overview of economic and policy news with a focus on the food and consumer goods industry. Featuring the latest developments and guidance on the rising cost of living, the Ukraine crisis, labour shortages, COVID-19 and adapting to a new relationship with the EU.

Growth Plan

The Chancellor of the Exchequer has announced his Growth Plan with the aim of stimulating growth and tackling the cost of living crisis. Measures include:

  • Extra support for unemployed over-50s
  • Creation of new Investment Zones – with liberalised planning laws, accelerated tax relief and no stamp duty
  • Corporation tax to remain at 19%
  • VAT-free shopping for overseas visitors
  • 18-month transitional measure for wine duty
  • Alcohol duty rates will not rise in line with RPI
  • The increase in Employer National Insurance Contributions and dividends tax will be cancelled. The increase in the National Insurance rate will be cancelled from November 6th
  • Abolishing higher rate of income tax (45%). New single higher rate of 40%
  • Basic rate of income tax to be cut to 19p from April 2023
  • The threshold before stamp duty is paid has been raised to £250,000
  • The cap on bankers' bonuses has been lifted

Business energy support

The government has announced an Energy Bill Relief Scheme to fix electricity and gas prices for all businesses, charities and public sector organisations for an initial six months from 1 October. This support package will provide significant relief to businesses across the food supply chain.

For further insight including IGD Viewpoint, please see here.

Interest rates rise

The Bank of England (BoE) has announced that the Monetary Policy Committee has voted to raise interest rates from 1.75% to 2.25%. This is the highest level in fourteen years. Independent analysts have forecast that interest rates may increase to 3.75% by the end of the year.

The committee forecast that inflation is expected to peak at just under 11% next month and remain above 10% over the following few months, before starting to fall back. The Bank of England has said it now expects a 0.1% fall in GDP over the current quarter, suggesting the country is already in a recession.

Public sector debt

Government borrowing for August 2022 was £11.8bn, twice the level forecast by the Office for Budget Responsibility. High inflation has led to increased interest costs on government debt. Debt interest payable was £8.2bn, the highest August figure since monthly records began in April 1997.

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