On the One Hand You Have Food ... On the Other Gloom

Posted on Apr 06, 2022. by NTI

Where will you be placing your savings at the end of April? Will you be placing bets on the future of the construction industry? Are you going for food and beverages (we're a hungry lot, us Brits, and we have learnt to expect strawberries and asparagus in November, as well as satsumas with our salad in summer).

On the other hand; what about services? We have always been better at doing rather than making stuff, and 'serving' the rest of the world is what we have always done best.

News hot off the wires today (Wednesday 6 April) reported an anachronism in the UK construction industry. New orders across the sector rose strongly in March, with the proportion of business leaders reporting growth reaching the highest level since August 2021, as builders made houses whilst the spring sun shone. However, business confidence in the construction sector fell to a 17-month low in the same month. Economists, who have a very tight relationship with gloom, have been saying for a couple of months that the boost to the economy from the removal of almost all Covid-19 restrictions in the UK over the past month could be limited by the worsening cost of living crisis and supply chain disruption.

We in the NTI newsroom haven't been so aware of such pessimism since Billy's uncle read out divorce stats during his speech at his daughter's wedding. What is going on? The frothy bit at the top of the wave as it rolls to the shore is the economic boom many sectors are enjoying (much to the hurrumphing of economists), on the back of many of us determined to spend the money we accumulated during the lockdowns of the past two years. The grey wave beneath, threatening to thunder onto the beach, is the “crippling rise” in inflation, which is most keenly felt in the price of raw materials and transport, and companies were braced for more disruption due to the war in Ukraine.

It's a tug-o'-war between people with money to spend and increases in prices, logistics difficulties and capacity constraints. Many nay-sayers believe there can only be one winner.

Down the road in the supermarkets there is much chat around the theme: "What exactly do MPs do?" Many of those who help us fill our trolleys at a weekend reckon that the UK's food industry may shrink permanently if ministers fail to address labour shortages from Brexit and Coro ... blah, blah, blah that have already resulted in mass pig culling and crops being left to rot. Mmmm, rotting crops, what can you do with those, Jamie?

Before the pandemic Britain benefitted from having Mikolaj and Jakub and 100,000 of their Eastern European mates picking, packing and plucking stuff that we all then enjoyed on our plates as their brothers fixed our plumbing. Within the food industry, meat processing and fruit and vegetable picking have been among the worst-affected sectors. Among other things this shortage of smiley, willing labour led to more than 150,000 surplus pigs building up on UK farms last year, as processors were unable to slaughter and butcher them.

Someone in a tweed cap sitting in a 1991 Defender said: “If you can’t get the labour, it’s easier to get the work done overseas . . . people are looking to automation but to invest in automation you need confidence, and with rampant inflation that is lacking.” His mate with red nose and cheeks and brace of pheasants over his shoulder said: “... we 'ave issues (we do) with food security, animal welfare and the mental health of those working in the sector  ... but the Government has not demonstrated a strong understanding of these issues, and even on occasion sought to pass the blame on to the sector on the basis of incorrect information about its own immigration system."

"Have you considered doing a 'reverse Clarkson', selling up and going to work in the service industry?", their interviewer said.

"Why would we do that?" tweedy and bracey retorted, incredulously.

"Because output in hospitality, retail and other services rose last month to its highest level in ten months despite plummeting confidence among businesses, according to a closely watched survey," came the response.

And she is right. The purchasing managers’ index for the services sector, compiled by S&P Global and the Chartered Institute of Procurement and Supply, rose for the third consecutive month to reach 62.6, up from 60.5 in February. (The 'good numbers' are always on the right side of 50.) As it pretty much always does, the service sector is supporting the rest of British industry. So much so that economists are concerned there could even be good news in the long run on the economy and GDP. That will never do. They are off to sharpen their pencils.

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