As the new Labour government inherits a difficult economy, IGD’s economics experts have released a new Viewpoint report, ‘New government, new direction?’. It unpacks the UK food system’s role in delivering growth and employment, alongside an inflation forecast.
While the government grapples with how policy can boost growth, the report highlights the fact that food and consumer goods account for 7% of the UK economy and that our food system constitutes the largest private sector employer. The implications are that food and consumer goods can both continue to grow in value and increase household wealth and spending.
However, the report shows that the long-term view is not so simple, as the rise in minimum wage will be keenly felt by retailers who are already contending with increased costs and poor volume sales.
Although the economy has moved into real-terms growth, food and drink inflation is expected to remain positive. According to the forecast, it is expected to be at 0.1% in quarter three of this year and will gradually rise to between 1% and 3% during 2025, creating a levelling-off effect. IGD believes that the downward leg of inflation is nearly over.
Chief Economist at IGD, James Walton, commented: “The UK will not return to a pre-crisis economy for some time. But the food system has a huge role to play in supporting economic resilience, growing GDP and providing jobs in our local communities.”
Meanwhile, IGD’s latest ShopperVista data shows that the income divide between high and low-earning households is still a major factor affecting shopper confidence. Of adults on a lower income, only 29% are expecting to be better off in the year ahead compared to 59% of those on higher incomes. The survey also found that 62% of all adults are expecting food prices to be more expensive in the year ahead and only 13% expect food prices to fall over the coming year.
Added to this, a recent poll undertaken by IGD reveals that the current mood among shoppers is tentative post-election, with a modest view that financial conditions will improve.
Naomi Kissman, Social Impact Director at IGD, said: “Our food system is critical to our UK economy and to driving growth. However, as we experience greater impacts of a changing climate and ongoing geo-political uncertainty, it is also facing a period of far greater risk. Therefore, it’s encouraging to hear the new government is prioritising boosting food security.
“There is a huge opportunity for businesses and policymakers to work in partnership to deliver a more resilient, sustainable and economically successful UK food system.”
