At the start of what is expected to be another challenging year for the consumer goods industry and households in the UK, IGD has released its latest Economics Viewpoint Report and a new food inflation forecast.
With a general election looming and many low-income households still struggling to recover from the surge in inflation, the organisation notes that businesses will need to move through a complex economic and political landscape, while meeting the needs of shoppers.
IGD’s new forecast shows that food and drink inflation will not turn negative until at least 2028, estimating that the figure will sit between +0.3% and +2.3% at the end of 2024, compared to 8% currently. As businesses will be under pressure to observe margins, the report states that living standards are expected to fall lower than pre-pandemic levels.
IGD expects to see inflation level off at +1% to +2% by 2025, contributing to a cost-of-living crisis for some time. Contrastingly, the industry organisation’s analysts estimate that fewer shoppers will be cutting their expenditure. Although, it is suggested that many will be using their resources to pay off debt.
James Walton, Chief Economist at IGD, said: “For the foreseeable future, UK output will remain flat, meaning that economic recovery from the pandemic is now in the past rather than the short to mid-term future.”
Michael Freedman, Head of Economic and consumer insight, added: “The recent inflation figures highlight that the cost-of-living crisis is still real for many consumers. There is a real divide between mainstream society and those on the lowest incomes. A one size fits all approach to meeting customer needs will not suffice in this market.”
As political parties share their plans for reforming the UK economy towards the General Election, IGD stated that food businesses will also need to keep abreast of the slew of upcoming new policy changes.
It highlighted that ahead of the Spring Budget, there will be a full roll-out of the Target Operating Model, which will see processes at borders change and potentially slow down imports on the road. Other new policy activities include a review of origin labelling for food and consumer goods, an update on the interoperability of the deposit return scheme, and the government’s response to the independent review into labour shortages in the food supply chain.
As the food and consumer goods sector strives for resilience in the run-up to an election, IGD’s Economics and Public Policy Manager, Matt Stoughton-Harris, said: “The Conservatives will be compelled to take action on previously stalled food security and environment policies in the event of a third term, while Labour have shared a Green prosperity plan that would increase investment in businesses, alongside loosening the supply-chain with improved relationships with the EU.”
Regardless of which government inherits the UK’s complex economic and policy landscape, IGD’s latest Viewpoint Report recommends that food businesses plan ahead to stay ahead of policy changes in a tough climate of low economic growth.
NAM Implications:
- Given that supply and retail is about implementation…
- …IGD rightly focuses on the results of economic and political changes.
- Thus allowing supplier and retailer teams to focus on practical application…
- …in terms of optimising joint gains at the supplier-retailer interface.
- A close reading of the IGD’s latest Viewpoint Report has to be of benefit.
