Economics bulletin 26 August

Date : 25 August 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.

22 million to cut back on heating and eating

Ofgem has announced an 80% increase in the energy price cap, to take effect on 1st October. The typical annual bill will rise from £1,971 to £3,549. Nearly 22 million consumers are set to cut back on both heating and eating once the energy price cap rise takes effect, according to the latest IGD research.

For further insight, please see our article here and our video explainer here.

Increased pressure on the eating out market

Consumers cutting back their spending is expected to result in further volume loss for food retail and increase pressure on the eating out market.

The latest IGD research has revealed that 71% of consumers plan to cut back on eating out in the next few months and more than two thirds (68%) plan to reduce the amount of food consumed when eating out. See IGD forecasts for the eating out market here.

Inflation may peak at 18%

Independent analysts predict that UK inflation may increase to more than 18% in January, which would be the highest level in 50 years.

Significant rises in gas prices are putting upward pressure on producer input prices, which are likely to feed through to consumer prices.

IGD forecasts that food inflation will reach 15%, with a +/- 1% margin of error, by the autumn.

Download our free Viewpoint Special: Exploring the outlook for food inflation here.

Felixstowe port strikes

An eight day strike at the port of Felixstowe will come to an end on 29 August.

Although it is the UK’s largest container port, only 2% the UK’s food imports pass through Felixstowe, and these are expected to be re-routed through other entry points.

However, supply of durables such as clothes and electronics is expected to be disrupted.

CO2 gas supplies

CF Industries has announced its intention to temporarily halt ammonia production at its Billingham plant due to the rising price of natural gas, making production uneconomical. Once the plant is safely shut down, CO2 production will stop until the plant is restarted. This raises concerns among key sectors that rely on CO2 including the British meat industry.

Strategic Trade advisory group

DEFRA is calling for applications to join the Strategic Trade Advisory Group. The group advises Department for International Trade ministers on trade policy through high level strategic discussions.

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