Home Business News As the economy recovers, what new challenges are emerging?

As the economy recovers, what new challenges are emerging?

by LLB Finance Reporter
27th Jul 21 12:38 pm

With vaccinations being rolled out rapidly and restrictions lifted, shopper confidence remains relatively high. This is driving economic recovery, but experiences continue to vary and evidence of a “K-shaped” recovery persists, according to IGD.

In the second issue of its quarterly ‘Viewpoint’ report, the economics team at IGD focus on the challenges emerging for the food and consumer goods industry as the economy continues to recover.

The latest research has highlighted three key themes:

Significant risks to the recovery remain

Businesses need to remain alert and agile as a number of factors could mean bumps in the road to recovery:

  • Possibility of further setbacks relating to COVID-19 due to the emergence of new viral variants
  • Labour shortages are likely to continue and to create operational difficulties
  • Other inflation pressures are also mounting
  • UK transition out of the EU is ongoing – expect friction in UK / EU and GB / NI goods movement

The shopper landscape provides opportunities but also challenges

Business will need to adapt to a shopper landscape that has been changed significantly, perhaps permanently, by COVID-19:

  • A hybrid working-from-home / from-the-office model seems likely in the short term, creating operational issues (and opportunities) for retailers and suppliers
  • Further recovery of foodservice and hospitality may act as a brake on growth for retailers in the short term, but will open up new routes to market for suppliers
  • Shopper spending priorities are changing as new options become available, challenging spend on food and consumer goods

Government priorities are shifting

Government priorities are shifting as longer-term issues return to focus. Improving environmental and health outcomes will be major themes, with far-reaching implications for the food and consumer goods industry.

Business have made good progress on improving both health and environmental practices. However, it is important to recognise that there is more to be done. A clear direction of policy by government will help businesses to remain on track, but there are also opportunities to demonstrate leadership and shape the future policy agenda.

Naomi Kissman, Strategy and Corporate Affairs Director at IGD said, “Shopper confidence in the UK is relatively strong, driving economic recovery. Rapid spread of the Delta variant and delaying the easing of restrictions is not thought to have presented significant new economic risk, but COVID-19 remains a major uncertainty.

“Other challenges lie ahead as the UK navigates a tightening labour market and implementation of new border measures for goods imported from the EU.

“With so many downside risks in play, including COVID-19, businesses should not expect a smooth, straight recovery. There are likely to be many bumps on the way, especially if new viral variants continue to appear. Long-term planning will be difficult for a while, so businesses will need to stay agile.”

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