A Certain Less.

Dr Clive Black

“A very Happy Fourth Decade to all those associated with Coriolis!”

Here is hoping for less politics!

That fourth decade commences in the UK with more certainty from a political perspective than may have reasonably been expected as the country approached the final month of the third decade, when most folks became tired and, frankly, worried about a dysfunctional House of Commons.

Regardless of one’s political persuasion, and few would not concede that the UK has become a worrying divided ‘nation’ over its relationship with the European Union (EU), a clear majority Government brings with it some clarity around whether the country will remain in the EU or not.  Also there is consequent scope to make domestic policy decisions that can seek to positively evolve a stuttering economy (whilst not necessarily clever or acceptable, who could blame the vast majority of British who by the Election just wanted in or out but no more Mr. Between).

Indeed, that stutter was heavily conditioned by the political paralysis as public policy decisions were deferred, so were Government expenditure commitments, business delayed and sometimes cancelled investments whilst consumers became worried too. The growing real incomes consumers have been receiving since mid-2018 have been allocated to spending patterns more reminiscent of those that have, or are about to lose their jobs.

With a potentially functioning Government, the UK looks less of a basket case than it has done for some time now. Quite whether or not Prime Minister Johnson can deliver a satisfactory outline trade deal with the EU by the end of CY2020 remains to be seen. However,  with a clear majority he can firstly negotiate with more confidence that whatever he brings back can pass through Westminster, something that will not probably be lost on the EU, which seems to have changed its tone, along with the defeated British establishment, in recent weeks.

Hopefully, this augurs well. Perhaps importantly, Johnson can also spend less time worrying about the lunatics at the fringe of the UK-EU debate; he kicked out the revisionist ‘remoaners’, can he now deal with the purist English nationalists?

Does political clarity bring benefits?

With less uncertainty, there is perhaps more scope for the UK to be less of a pariah state to international capital than has been the case since mid-2016. Hence, foreign direct investment (FDI), may build again, albeit with the prospect of a firmer sterling if the UK recovers, some British assets are likely to be less bargain basement than was the case for much of CY2019 in particular. Of course, it should be said that if Johnson messes up on UK-EU relations then we could be back to a square one of sorts.

More broadly though, political clarity brings with it greater scope for deferred private domestic investment to also emerge, so boosting the economy.  Additionally, no matter what colour rosette was to be in Westminster after the December 2019 General Election, Government expenditure is also set to rise, both on public services and infrastructure, which also expand the economy.

The consumer wants more of less

So what of the British consumer in all this? Well, real incomes continue to rise and employment levels remain fulsome, which is a good starting point. Whilst certainty should be helpful in general, not everyone is skipping to work full of political joy at the start of the new decade, which needs to be reflected upon; a strong bounce in consumer economic activity, therefore, may be too optimistic. As such, Government policy measures, particularly over the first 100 days, are important in setting the tone of expectations.

Again, if Johnson is on the money, then it is not unreasonable to expect the mix of rising Government expenditure and business investment to feed into improving consumer confidence through to the spring, which should feed into the value of goods and services demanded in time.

The point here about the value of goods and services is particularly contemporary and important. It is easy but probably simplistic, to assume that the deflated consumer confidence of CY2019 was all down to political uncertainty. Whilst real, but impossible to precisely measure, it is also very important to re-visit previous underlying themes of well-being and sustainability, which arguably most demonstrably fused in CY2019.

What this fusion means for mass consumer goods markets is less. It means less in all categories, formats and channels as shoppers buy more precisely, buy to waste less, buy to last longer and buy to reduce conspicuous consumption. Shoppers are also buying for evolving functional outcomes, be that dietary, environmental and animal welfare. Where these factors combine, the market output can be particularly potent.

Less from a volume perspective, in general, is more challenging to business. However, in evolving to a society where more and more people seek to be healthier and living in a more sustainable environment, the value of goods and services, the latter being particularly important as more calories are eaten out of the home, comes to the fore of business strategy.

The British food industry will come to terms with whatever the new Government decides domestically, benefiting on the one hand from more clarity but noting an ongoing rise in the National Living Wage to come as Mr Johnson rewards the working voters of ‘the North’, and in its international relations from the EU, to ongoing relations with the USA, will Mr Trump be in power in February 2021(?) and the wider world.

 

A certain less

Hence, the start of the fourth decade has more certainty in some fundamental new senses for the British food scene but the future in aggregate also means less; a certain less.

 

Dr Clive Black

Senior Advisor

Coriolis Consulting

 

January 2020