Is there light in that there tunnel…?
I hope that 2023 has started well for you and that it followed a fun festive period. One of the more uplifting features as the days pass by in the first month of the New Year is their light extension, mornings becoming a bit brighter earlier, the afternoon ending in with the absence of the dark.
Which is a nice segway into how 2023 may go. As the year starts inflation predominates. Indeed, in the UK food system upward forces remain strong and may yet not peak until winter is over. Whilst so, in the absence of new shocks, like a pandemic, a major war in Europe, or lunatics elected by a bunch of nutters to run the UK, the outlook for the UK food system in 2023 has the basis to be a little more settled and to also improve.
Famous last words? Well, maybe for sure as we still have to navigate never-ending harvest risks, the 2022/23 southern out-turn looks alright bar the drought effect upon the soy crop in Argentina, whilst crude oil prices and sterling movements can still cause pressure points. Whilst we cannot predict the northern hemisphere harvest of 2023, Putin’s grip on energy markets feels weaker; he may have played this oil & gas card and found that the other players were more agile, determined and so resilient than he anticipated.
Meanwhile, Sunak is a technocrat who is seeking to work with a dysfunctional Conservative party that has lost all sense of the greater good and so discipline, until the late 2024 UK General Election centred upon his five priorities. With respect to inflation, again, with no new shocks and taking favourable comparatives into account, the rate of price appreciation should notably ease from mid-spring, which gradually should ease the worry lines of shoppers, see a recovery in consumer confidence, and in time see volumes also stabilise and provide a basis to turn positive in 2024.
As a technocrat and realist, so not a naive ideologue like Truss, I wonder what sort of Christmas she had…, Sunak can possibly also take some of the heat out of relationships with the EU, which may make for less trade friction across the seas surrounding Great Britain, which would be helpful for many food businesses.
By the end of 2023, Shore Capital forecasts that UK CPI will be 3.0-5.0%, so less than half of the year start level. With labour in short supply, skilled labour shorter still, and a National Living Wage award rising by not far short of 10%, with indexed non-disability benefits too, workers are likely to be gaining annual rises above where we anticipate year-end inflation. We sense annual wages across the board will be rising still by 6.0-7.0%, which would mean as 2024 commences, real living standards in the UK may be rising.
Hence, as 2024 starts, the trade unions are seeking to make the most of high CPI, understandably, and tight markets, albeit one senses that the public and business alike are starting to adapt to industrial unrest in a way that raises new questions. For example, many folks will probably not send Christmas cards again as a result of a December strike whilst ambulance service driver strikes sound horrendous ahead of their arrival but after the two so far undertaken there has been no real noticeable impact which is perhaps revealing a) how poor the service may be for some folks in the first place, b) problems with GPs/A&E and social care have already paralysed the service, and c) should we be using ambulances as we do if many folks can make their own way to and from a hospital?
The British food system, will not be a political priority, sadly, even though the pandemic and the Ukraine War have been significant shots across our bows as to the need to adjust both energy and food security. In this respect, as argued before here, I believe that we are missing an immense opportunity of major strategic importance.
So, whilst we start 2023 with many challenges, frailties, and uncertainties, and matters could, for elements of the food system, particularly food & beverage, worsen before they mprove, there are also grounds to believe that if ‘we’ can tough it out, make the most of a crisis to take the right decisions, and carefully manage costs and cash, then come the year-end we may just be a little better off with brighter times ahead.
Coriolis is a high-class act that helps businesses to do things on the ground better, to improve operations and so deliver simpler, better and more efficient outputs. Call Mark Dudley if you want to discuss anything, and maybe he and his team can help you enter 2024 in better heart.
Wishing you all well for 2023.
Dr Clive Black
Senior Advisor
Coriolis Consulting
January 2023
