Economy

You can imagine the wrinkling of the critic’s nose. The Brexit dish served up for the UK food industry is overcomplicated, unbalanced and in parts downright nasty. Food has always been at the sharp end of the UK’s decision to leave the EU: a 24/7 supply chain that brings in from Europe about a third of overall food consumption and is highly vulnerable to portside delays, allied to a low-margin domestic sector that relies on immigrant workers and on exports, mainly to the EU, for its profitability. Trade figures offer misguided comfort. Global exports grew strongly in the first half of this year, according to the Food and Drink Federation, exceeding pre-Covid levels for the first time. But the reality is headline figures mask a collapse in exporting by small businesses and restructuring by bigger companies to absorb the estimated 15 to 20 per cent higher costs of sending goods to continental Europe, said Shane Brennan from the Cold Chain Federation. While first-half exports to the EU are still 5 per cent below their 2019 level, imports from Europe are up by nearly 22 per cent.That’s hardly surprising given that British exporters must bear the costs and hassle of health and safety checks and customs paperwork, while full border checks in the opposite direction were postponed again this year. If anything, the aggravation of selling overseas is set to worsen. From December, my colleague Peter Foster reports, new UK regulations requiring formal, paper-based veterinary attestations for animal products for export could cripple sales into Europe. The UK has toughened rules that farm animals must be regularly inspected by qualified vets, requiring that each animal, meat product, offal or hide comes with a paper confirmation. This is impractical, as well as contrary to the promised crusade against red tape. Exports of meat, 70 per cent of which go to the EU, are likely to suffer given a lack of qualified vets to ensure compliance. Farmers, who rely on selling every part of an animal to eke out a profit, could be stuck with parts of a carcass for which there isn’t a domestic market, leading to pressure to put up prices on UK sales.Such self-harm only increases industry frustration about the free rein given to importers, after full inbound checks were again delayed until the end of 2023. The risks of doing so are acknowledged in government controls to try to combat problems such as African swine flu. While smuggling has always been an issue, stories about maggot-ridden meat being seized at Dover highlights safety risks in a most unpleasant way — at a time when the chair of the Food Standards Agency is warning that the government’s rush to jettison EU regulations presents a risk to public health.All this is at odds with heightened focus on UK food security since the start of the pandemic and Ukraine war. There remains a philosophical tug of war between free traders who would slash tariffs and open up the UK market to competitors and those who prioritise domestic production and protection for agriculture. “It’s left UK agri-food policy adrift,” says Tim Lang at City University’s Centre for Food Policy. “The UK is quietly exposing its own food security vulnerabilities.”

Political turmoil has dented the chances of any joined-up thinking, in a government that has rattled through four ministers for exports since July. Some stability is probably a prerequisite for meaningful progress even on the basics, such as the long-promised modernisation of archaic systems — a project about which the industry is both hopeful and deeply sceptical. Technology is meant to underpin the imposition of the delayed import checks next year; digitisation could lessen the burden of endless paper-based export requirements; digital traceability, while unproved, could also play a role in tackling criminal wrongdoing and helping overburdened and understaffed regulators to manage food safety enforcement, argued Brennan.Until then, the food and agriculture sectors are stuck chewing through an increasingly turgid Brexit menu: outdated and unappetising, but thoroughly [email protected]@helentbiz

Video: The Brexit effect: how leaving the EU hit the UK More

LONDON (Reuters) – Britain still faces a 40 billion pound ($46 billion) budget hole that will need to be filled by tax rises as well as spending cuts, despite recent U-turns on measures proposed during Liz Truss’s short-lived premiership, a think tank said on Tuesday.The Resolution Foundation, which focuses on issues facing low- and middle-income households, said new Prime Minister Rishi Sunak and his finance minister Jeremy Hunt faced unappealing choices ahead of a budget statement due on Nov. 17.”While the recent focus has been on conditions improving post-Trussonomics, the central picture remains one of a weaker growth, higher borrowing costs and expensive tax cuts that have left a fiscal hole of at least 40 billion pounds to fill,” the Resolution Foundation’s research director, James Smith, said.Britain’s Office for Budget Responsibility last published borrowing forecasts in March, since when the growth outlook has weakened due to surging energy prices, while interest rates have risen in Britain and globally, pushing up borrowing costs.The Resolution Foundation estimated that tax rises and spending cuts of at least 30 billion pounds would be needed to ensure debt was falling as a share of gross domestic product by the 2026-27 financial year. Previous finance ministers had also left a minimum of 12 billion pounds of leeway to achieve their budget goals, the think tank added.Previously the Institute for Fiscal Studies had estimated Britain faced a budget hole of 62 billion pounds in the wake of the tax-cut plan announced by Truss’s finance minister, Kwasi Kwarteng, on Sept. 23.This ‘mini-budget’ pushed sterling to a record low against the U.S. dollar and forced the Bank of England to intervene in the bond market, prompting Truss to reverse some of the plans and sack Kwarteng – but too late to save her premiership.The Resolution Foundation said cuts to investment spending often appealed to British governments seeking to save money – but would come at the cost of longer term growth and would raise 10 billion pounds at most.High inflation meant government departments – which mostly have fixed cash budgets – are already facing 22 billion pounds of real-terms cuts by 2024-25, limiting the scope for further savings and creating pressure for extra spending, it added.The government is reviewing a previous promise to raise pensions and welfare benefits in line with inflation, which will cost around 9 billion pounds.Around 17 billion pounds of Truss’s tax cuts remain in place, largely the reversal of a 15 billion pound rise in payroll taxes introduced by Sunak when he was finance minister.”Further austerity for public services is also likely, but there are limits to how big these can credibly be,” Smith said. “This reality means that the Autumn Statement is likely to involve tax rises, not just spending cuts.”($1 = 0.8692 pounds) More

BENGALURU (Reuters) – Malaysia’s central bank will tighten its policy rate by a quarter point for the fourth time in a row on Nov. 3 as upside risks to inflation persist and to support the weakening currency, a Reuters poll showed.Bank Negara Malaysia (BNM) started raising rates in May even though inflation was within its target range of 2%-3%. It has since hiked rates by 75 basis points to keep inflation in check.In September, inflation fell marginally to 4.5% from 4.7% in August but robust domestic demand and an accommodative budget pose a risk and economists said all-time high core inflation in September indicated it was sticky.All but two of 27 economists in the Oct. 25-31 poll predicted BNM would hike its overnight policy rate by 25 basis points to 2.75% from 2.50% at its Nov. 3 meeting.”The direction of fiscal policy measures in 2023 is still unclear,” noted Sanjay Mathur, chief economist, Southeast Asia and India at ANZ.”Besides, the odds of the U.S. Fed delivering another 75bp hike in November have also risen. This does not bode well for the Malaysian ringgit, especially when the international reserves are also on a steady path of decline.”The Malaysian ringgit has fallen around 12% this year.Two economists – at Barclays (LON:BARC) and UOB – expected BNM to pause at the meeting given a weakening global outlook and to assess the effect of cumulative hikes.Nearly 90% of economists forecast BNM will raise rates in Q1 of next year, including the two economists calling for a pause in November, giving a median forecast of 3.00%.While 13 of 18 penciled in a 25 basis point hike in Q1, three said 50 basis points. Two economists predicted no move.The median forecast showed the overnight policy rate would remain at 3.00% until at least the end of next year. However, beyond Q1, seven economists expected rates to go up at some point in 2023.”As core inflation gains momentum, we continue to expect BNM to hike policy rates at consecutive meetings (25bp/meeting pace) through H1 next year, bringing the policy rate up to 3.5%, from 2.5% currently,” analysts at Goldman Sachs (NYSE:GS) said.”The evolution of subsidy policy after the elections remains a key risk – a faster shift to targeted fuel subsidies may imply higher inflation pressures, and more hawkish BNM policy outcomes than in our baseline forecasts.”The Malaysian economy grew by 8.9% in the second quarter, its fastest expansion in a year, mostly driven by domestic demand and resilient exports although the momentum is unlikely to be sustained.”Economic growth is likely to weaken considerably over the coming quarters as the boost from reopening fades and weaker external demand drags on exports,” Gareth Leather, senior Asia economist from Capital Economics, said. More

Demand for gold was also strong from jewellers and buyers of gold bars and coins, the WGC said in its latest quarterly report, but exchange traded funds (ETFs) storing bullion for investors shrank. Gold is typically seen as a safe asset for times of uncertainty or turmoil, but many financial investors sold shares in gold-backed ETFs as interest rates rose and pushed up returns on other assets. Offloading of bullion by ETFs helped push gold prices down 8% in the third quarter, but this price fall helped stimulate demand for jewellery, the WGC said. In total, the world’s gold demand amounted to 1,181 tonnes in July-September, up 28% from 922 in the same period in 2021, the WGC said. Demand in the year to September had recovered to pre-pandemic levels, it said. GRAPHIC: Global gold demand https://fingfx.thomsonreuters.com/gfx/ce/znvnbdnkwvl/WORLD%20GOLD%20COUNCIL%20Q3%202022.JPG Buying by central banks in the third quarter took their purchases for the year to September to 673 tonnes, more than the total purchases in any full year since 1967, according to the WGC. Among large buyers were the central banks of Turkey, Uzbekistan, Qatar and India. Purchases of gold bars and coins also surged in Turkey to 46.8 tonnes in the quarter, up more than 300% year-on-year, as people bought gold to shield themselves from rampant inflation. “Looking ahead, we anticipate central bank buying and retail investment to remain strong,” said WGC analyst Louise Street. “We also expect to see jewellery demand continue to perform strongly in some regions such as India and Southeast Asia,” she said. Following are numbers and comparisons. GOLD DEMAND (tonnes)* Q3 2022 Q3 2021 % change SUPPLY Mine production 949.4 927.7 2% Net producer hedging -10.0 -12.4 -19% Recycled gold 275.8 292.8 -6% Total supply 1,215.2 1,208.2 1% DEMAND Jewellery fabrication 581.7 515.1 13% Technology 76.7 83.4 -8% – of which electronics 62.8 69.0 -9% – other Industrial 11.3 11.6 -2% – dentistry 2.5 2.8 -11% Investment 123.8 232.8 -47% – Of which bar and coin 351.1 258.9 36% – – Of which bars 220.4 177.5 24% – – official Coins 100.2 57.5 74% – – medals/imitation coins 30.6 23.9 28% – ETFs & similar products -227.3 -26.0 773% Central banks & other inst. 399.3 90.6 341% GOLD DEMAND 1,181.5 921.9 28% OTC and other 33.8 286.3 -88% TOTAL DEMAND 1,215.2 1,208.2 1% * Source: World Gold Council, Gold Demand Trends Q3 2022 More

The new estimate for 2022 growth domestic product (GDP) improves on last July’s projection by 0.9 percentage points. The central bank, however, also reduced the growth outlook for 2023 from 3.2% to 2.7% because of challenges in the global economy. Central Bank of Costa Rica President Roger Madrigal told reporters this year’s growth is in part due to the country’s exports of tax-free goods, adding that negative impacts are still expected because of slowdowns in global trade partners.Costa Rica’s economy grew 7.8% last year as it recovered from a 2020 recession brought on by COVID-19 damage to the country’s ecotourism. Tourism authorities expect 2 million visitors in 2022, just two-thirds of the 3 million arrivals in 2019, but above the 1.35 million reported for last year. More

The head of National Grid has warned that many British households would find this winter “financially very, very hard”, despite government support to limit the rise in gas and electricity bills.John Pettigrew, the chief executive of the company that oversees Britain’s electricity and gas systems, told the Financial Times he was “under no illusions” about the struggles many people would face during the colder months, despite a universal subsidy on all domestic energy bills until April. “Even with the [taxpayer-funded] price cap this is a doubling-up of what people are used to paying for their energy bills,” said Pettigrew. “Therefore inevitably there are going to be people who are going to struggle.”The government has capped the unit cost of energy until April, which would mean a typical household would pay about £2,500 on average over a year. But last winter the equivalent figure was £1,277. Each household will also receive a £400 rebate on energy bills with additional means-tested payments through social security benefits.But charities have warned the help will not be enough to avoid 7mn households, or a quarter of all homes, experiencing “dire fuel poverty”.Pettigrew said that when the support ended in April a more targeted scheme to help those households in the most need seemed the best solution. “Something like a social tariff makes a lot of sense.”John Pettigrew supports a targeted scheme to help those households most in need when a government subsidy ends next April © Gretchen Ertl/ReutersHis call mirrors that of some big energy suppliers, such as ScottishPower, that have been pushing the government to set up a subsidised “social” energy package that would apply to the most vulnerable customers. Pettigrew was speaking ahead of the announcement on Tuesday that National Grid was setting up a £50mn fund to cover the next 18 months, which it will distribute to organisations such as the Fuel Bank Foundation and Citizens Advice that assist households struggling with the cost of living crisis. Although National Grid does not supply electricity or gas it receives a proportion of all bills to pay for the management of the energy grids and oversee the country’s electricity and gas systems. These so-called network charges, which are distributed among a number of companies, make up about 10 per of a domestic bill. Simon Francis of the End Fuel Poverty Coalition said energy companies were fast recognising they had a “moral obligation to step in and help” struggling households.Pettigrew insisted that National Grid, which made underlying profits of £4bn during the year to March 31, was not launching the fund to try to head off a potential backlash against the energy industry as the cost of living crisis spirals.

He said the energy price crisis, which was exacerbated by Russia’s invasion of Ukraine, was “bigger than any one individual company can address and . . . what we are trying to do is be responsible and play our part”. Pettigrew, who was paid £6.5mn last year, added that the company in May announced it was returning £200mn to bill payers after generating strong earnings from the import and export of power to other European countries via subsea cables.National Grid in October warned households to prepare for the possibility of rolling blackouts this winter if, in the “unlikely” scenario, Britain couldn’t import sufficient energy from continental Europe during periods of high demand. Pettigrew said the company’s “base” scenario was for the country to have sufficient supplies to meet demand this winter. He added that unseasonably warm weather in recent weeks had helped countries in the EU to fill their gas storage facilities as there had been less demand for heating purposes. More

The South American country should see a narrower 2023 deficit of $2.63 billion, down from $3.78 billion projected in the initial 2022 spending plan, the ministry said, citing a draft budget that would land 7% below levels approved for this year.President Guillermo Lasso, a conservative former banker, drafted a 2023 budget of $31.50 billion, down from the $33.90 billion approved for 2022.The draft budget must still be approved by Congress, made up of majority opposition lawmakers, who have 30 days to vote on it.The economy ministry said the plan is backed by forecast economic growth of 3.1% and crude oil prices averaging $65 per barrel, as the government hopes the country will by next year pump some 188 million barrels.It currently produces about 493,000 barrels per day (bpd), though Lasso plans to ramp up extraction to about 750,000 bpd by the end of his term in 2025.Financing requirements for next year’s budget are seen falling to $7.58 billion, according to the economy ministry, down from $9.53 billion approved for 2022. “The main source of financing for next year’s budget will continue to be multilateral lending agencies, which provide credit on beneficial terms for the country,” the ministry said in a statement.Social investments under the plan total $15.28 billion, it added, including more spending on health, education, social security payments and university allocations.It would also guarantee an $1.87 billion investment plan, which includes spending on infrastructure, security and other areas, plus $1.31 billion for social protection programs for vulnerable families, the ministry added. More

(Reuters) – The Reserve Bank of New Zealand said on Tuesday a preliminary analysis of its climate change stress test indicated that river and surface water flooding may pose an even greater risk to lenders’ residential mortgage portfolios than coastal flooding.It said in a statement that in its assessment it had focussed on banks’ exposure to river and surface water flood risk in the Auckland region. “The results indicated that in a severe scenario, more than a quarter of the banks’ current Auckland mortgage lending was on land that could be impacted by flooding,” it said.It also asked banks to measure the exposure in their mortgage portfolios to flood zones under varying degrees of sea level rise ranging from 20 centimetres to 1 metre.”The results found there were significant differences in the share of mortgage lending on properties that lie within a coastal flood zone across different regions,” it noted.The findings are part of the November 2022 Financial Stability Report, which is due to be released on Wednesday.RBNZ Deputy Governor Christian Hawkesby said the aim of the exercise was to support banks to build their capability to identify climate risks and find solutions.”This will lead to more proactive management of climate risk,” he said. More