Category Archives: Investment

New Government, Same Challenges: Why the early years sector needs to engage with Labour

GK Adviser Noureen Ahmed considers Labour’s approach to the early years sector and why it is so important for providers to engage with the government.

Earlier this month, the Prime Minister Keir Starmer outlined his ‘Plan for Change’ in which he set out the six metrics he would like to hit by the next election. This was an important moment for Starmer to demonstrate to voters that his government means business after a turbulent five months in office. Starmer’s education metric, to ensure 75 per cent of five-year-olds are school-ready, falls under the government’s mission to break down the barriers to opportunity. This is one of five missions Starmer set out prior to the election in which he promised to bolster opportunity for all through improvements to the education system.

Early years education has long been a priority for Labour, with Starmer’s education team having been incredibly vocal about the sector in opposition. Even though much of the initial focus has been on delivering the previous government’s early years reforms, notably the rollout of the extended childcare entitlement, the new government is clearly preparing the sector ahead of launching its own early years agenda, as laid out in Labour’s general election manifesto.

Whilst the spotlight on the sector has been welcomed, some immediate concerns have been expressed by sector leaders, including: whether the government’s schedule to roll out the final stage of its extended childcare entitlement to up to 30 hours go ahead as planned in September 2025, and if the government can deliver its additional pledges for the early years sector successfully over the course of this parliament.

The recruitment and retention crisis facing the early years sector is the biggest barrier impacting the delivery of the extended childcare entitlement. Difficulties attracting people to work in the early years sector, coupled with an exodus of staff, means it is unsurprising early years professionals are sceptical about whether the final rollout will go ahead as planned. The Department for Education’s (DfE’s) recent announcement that it will provide £75 million in grant funding to help childcare providers deliver the staff and places needed next year is positive and suggests that the government is determined to launch the final stage on time, despite these challenges.

There was also some welcome news at the October budget with the government announcing £15 million in investment to begin the delivery of 3,000 school-based nurseries by the end of this parliament. Schools currently have the opportunity to bid for up to £150,000 to either expand existing nurseries or open a new one, with the government hoping to open around 300 new or expanded nurseries by September 2025.

Education secretary Bridget Phillipson has reiterated government’s appetite to deliver more school-based nursery provision. Making use of unused classrooms in primary schools looks like a sensible policy approach. However, the government could find it difficult to meet the commitment’s short- and long-term targets. Getting enough schools on board with the scheme could prove difficult. Even though there may be capacity to utilise the free classroom spaces available, the infrastructure (both physical and logistical) needed to create and maintain nursery provision is very different to those needed for primary school pupils.

The Labour government is also realistic about the need for a model which includes both state-delivered provision via in-school nurseries and maintained nurseries and provision by the private voluntary and independent (PVI) sector in order to meet capacity demands. In regard to the latter, the government understands the importance of the PVI sector in delivering high-quality early years education and so will be keen to work with the sector to deliver much of its proposed in-school nursery provision.

Moreover, Ofsted has said it will work to support the government’s plans by making it easier for high-quality providers to set up and expand nurseries. The watchdog’s plan to streamline the registration process for providers as well review how it inspects and regulates multiple providers is laudable because it allows the sector the chance to continue meeting the demand for early years settings.

The government has made a big play that in total will see investment increase by over 30% compared to last year, all whilst happening amidst a bleak fiscal outlook. This political priority as the education secretary has acknowledged must be accompanied by reform to deliver a sustainable early education system. This will mean high quality providers demonstrating value for money and their ability to scale up provision. Those providers with a proven track record and an ambition for growth will find a receptive ear within DfE and No 10. With the next phase of rollout in 2025 and the comprehensive spending review in the spring setting out the funding for the remainder of this parliament, providers have no time to waste. They should prioritise engaging with government to position themselves as a partner in the next phase of reform, and to demonstrate the role they play in ensuring a successful delivery.

A fork in the road for food security

GK Senior Adviser James Allan considers the publication of the Food Security Report and why the opportunity is ripe to engage with ministers and officials holding the pen on the food strategy due for publication in 2025.

The government has published its three-yearly Food Security Report and it is hefty. Five themes covering 16 sub themes and 37 indicators ranging from food crime and pathogen surveillance to physical access to food shops and consumption patterns. Ministers had chosen to delay the publication of the report in hope of avoiding the farmers in protest against the £1m cap to Agriculture Property Relief introduced at the autumn budget. But this issue has not abated. Tractors returning to Westminster on the day of publication detracts from the business of government and its work to address food security.

The report’s headline finding is that those disadvantaged across society, including low-income households and people with a disability, are less likely to meet government dietary recommendations, and this trend has increased. All the while, the UK’s self-sufficiency has remained broadly unchanged in the past two decades, but the risks have heightened. The UK continues to source food from domestic production and trade at around a 60:40 ratio. But digging a little deeper, the UK is highly dependent on imports for fruits, vegetables and seafood – all sources of micronutrients essential to balanced and healthy diets in the fight against rising levels of obesity.

The risks to food security and self-sufficiency are numerous: climate change, nature loss, water insecurity, labour shortages and geopolitical events, the list goes on. More than this, these risks are interconnected with both acute and chronic impacts which trigger and compound each other. One can easily imagine a shortage of rice on British supermarket shelves if an extreme weather event, compounded by increased geo-political tensions, threatens the 46% of rice that is imported from India and Pakistan. At home, declining levels of natural capital are somewhat slowing, but boosting domestic production will mean prioritising and funding sustainable farming practices that restore and preserve our ecosystems to fully reverse this trend. Such schemes are not cheap for a government navigating tight public finances, as the second phase of a comprehensive spending review has kicked off with the Chancellor asking government departments to find 5% efficiency savings.

What’s new?

The government is set to adopt a “systems approach” which will focus minds on the outcomes of the whole system from production to consumption. Defra secretary Steve Reed is also promising a new way of engagement with not just sector and industry leaders, but also academics and charities to corral collective ambition, influence and effort. For food producers and retailers, this is a seismic opportunity to leverage your consumer and business story for a political audience that is in listening mode.

Pulling this off will be the test of ministers and officials drafting the government’s new food strategy due for publication in 2025. Why? Because if this Labour government is truly socially minded, addressing food insecurity will be a political priority. Doing so will aid better health and educational outcomes thereby reducing the burden on schools and the NHS, both of which are areas the Labour party self-identifies as being custodians of.

For investors, having a clear understanding government workstreams toward food security will be important. Investment decisions will need to be considered in the context of UK self-reliance in the food and energy sectors, but especially where technological innovation better position investors to capitalise on emerging trends, ensure long-term sustainable returns, and help shape a more secure and resilient national food system.

While spectators might eagerly await the publication of the government’s food strategy next year, the opportunity to engage is now.

Navigating changes to food and drink packaging: A guide for investors

Mark Field, director and founder of Prof Consulting Group, outlines what investors need to know about packaging in the food and drink sector

Setting the scene

Food and drink packaging is undergoing major transformation with innovations at each stage of the value chain. By responding to regulatory, consumer, and supply chain challenges, companies are finding new ways to reach customers and help them shop more sustainably. The role of packaging is to keep food and drink intact, safe and fresh along its journey from producer to consumer. It provides a space to communicate information to customers and to represent a brand. Carefully managed, it is a window to showcase a company’s values, but poor execution risks significant brand damage.

Shifts in the regulatory and commercial landscape

Regulation – responding to concerns about environmental pollution and climate breakdown, the regulatory landscape is shifting to place responsibility on producers for the packaging they put into the market.

In Europe, the upcoming PPWR is part of the region’s circular economy plan to value waste and minimise its environmental impact. The new regulation updates existing rules and aims to harmonise how packaging is managed throughout EU countries, making trade smoother. PPWR will require all countries to increase the share of reusable packaging which includes deposit return schemes, targets, economic incentives and minimum percentages of reusable packaging. In addition, 70% of all packaging by weight must be recycled by 2030. For some companies this might mean investing in new packaging equipment to handle new materials, for example, in the transition from plastic to paper. For others it can mean an entirely new way of selling, such as using returnable glass jars instead of plastic pots.

Nations in the UK are considering (England) or have implemented (Wales) deposit return schemes where consumers return packaging to a retail outlet and receive money back. This requires investment into infrastructure such as reverse vending machines. Others are working with digital technology to trace their products through the recycling system starting with the home curb side collection and rewarding customers who participate.

The UK’s plastic packaging tax charges a flat rate per tonne of plastic packaging with less than 30% recycled plastic. Companies must ensure they have accurate information on the packaging they buy to submit data to a government register.

Communication on packaging sustainability must be accurate and not mislead consumers according to the upcoming EU Green Claims Directive and the UK’s existing CMA’s Green Claims Code. One of the goals is to ensure that consumers are empowered to participate in the circular economy and can make informed choices. Consumers and NGOs are alert to greenwashing and don’t hesitate to call out companies who overstep the line.

A new UN treaty to regulate the production and disposal of plastic is expected at the end of 2024. Brands are calling for a limit to the amount of virgin plastic produced and for support on recycling and reuse systems.

Consumers – people expect companies to ensure their packaging is sustainable and research shows they want to participate in the transformation. According to global surveys, recycling packaging is the most popular sustainable behaviour, practiced by 62% of people. Companies can respond to these needs with clear and accurate disposal communication and with innovation in packaging formats.

Supply chains – extracting raw materials places undue pressure on natural resources and creates pollution that worsens climate and nature breakdown. Reducing the extraction of virgin raw materials, such as oil and timber, is urgent. Food and drink companies can limit their contribution to these challenges and take the opportunity to strengthen their resilience in the face of shortages and rising costs. UK and EU packaging leaders are moving from efficiency and lightweighting towards new materials, recyclable and recycled, and reusable packaging formats. For example, alcoholic drinks companies are experimenting with infinitely recyclable aluminium instead of glass, and being lighter, the product has fewer transport emissions.

Risks and opportunities

Companies who are unable to understand or keep pace with regulatory changes face increased costs resulting from levies on non-recyclable packaging, fines for misleading green claims and increased costs of excess packaging. Evidence shows that if customers are disappointed, companies will lose sales.

However, leading companies in the sector are embracing the transformation and innovating across the value chain. For example, with smart packaging technology using freshness tags; using alternative materials to plastic such as seaweed coatings and mushroom fibre cushioning; and using more reusable and refillable packaging. Infrastructure to support circularity is also growing, with refill stations, mobile and fixed reverse vending machines, and scanning and tracking technology increasingly prevalent. Cameras and cloud-based systems can be used to enable traceability and visibility over each process involved in collecting, recycling and cleaning packaging.

Companies that can promote and support convenient sustainable living will succeed in today’s crowded market. Many value-driven brands are entering the market and winning customers on this basis.

What should investors be asking?

Investors who want to understand the sustainability of packaging used by food and drink businesses should be asking management teams the following questions:

How does the business actively prepare for upcoming regulatory change and comply with existing regulations?

Does the business follow industry codes and benchmarks?

How does the business track the competitive landscape and identify gaps and innovations that resonate with consumers?

Does the business understand how customers use and dispose of their packaging?

Does existing packaging have clear recycle/reuse instructions?

Can the business substantiate claims on packaging sustainability?

Does the business know and manage the full life cycle along the value chain from raw material production through to disposal?

Does the business communicate their sustainability status openly e.g. on website linked to a QR code on packaging?

How does the business collaborate with stakeholders in all markets to ensure their packaging is reused/recycled correctly?

Prof Consulting Group helps to lead business to success in the UK and Australian food industry with its team of industry-leading experts and extensive range of services. For more information or to discuss how Prof. Consulting Group can support your business, please visit https://www.profcg.com/contact/

The £0.5bn revenue raiser, incurring the wrath of farmers

GK Senior Adviser James Allan visited the farmers protest in Westminster and assesses the likelihood of a government u-turn and its agriculture policy plans.

On 19 November, farmers were out in force and took to the streets of Westminster for a heartfelt protest for a sector that feeds the nation. At the autumn budget, the Chancellor Rachel Reeves introduced a cap of £1m for assets eligible for Agriculture Property Relief and Business Property Relief. Estimated to raise £0.5bn a year by 2029/30 for spending on public services, the measure has been dubbed a ‘family farm tax’ for farmers that “don’t do it for the money because there is none”.

The extent to which the Chancellor’s action equates to a “death knell” for the family run farm is somewhat contested. While the Country Land and Business Association estimates 70,000 farms will be impacted by the change, various policy wonks and tax specialists argue that this does not consider other reliefs and is based on the quantity of farms, rather than ownership structures. Disputed figures aside, it risks fueling a shift public opinion against the government and one of the shortest-lived honeymoon periods for a new Prime Minster. A survey carried out by JL Partners found that 53% of respondents felt the autumn budget was unsuccessful, so the farming community are not alone.

Is this Reeves’ Cornish pasty tax moment?

When then-Conservative Chancellor George Osborne introduced a 20% tax on hot foods to end VAT anomalies in 2012, few anticipated the political drama of “pastygate” which ensued. The Conservative government was criticised for being out of touch, with some commentators even alleging class war. Then Prime Minister David Cameron was caught out for saying he’d eaten a pasty in Leeds Railway Station when the West Cornwall Pasty Company duly noted that the pasty outlet had closed two years previous. The controversy detracted from Osborne’s budget and ultimately led to a government u-turn and a negative with 49% of people describing the government’s handling of pastygate as a “shambles”. In a similar vein, the political fallout from this protest will be difficult for the Labour government to manage. Whatever Reeves’ next move, pastygate demonstrates that u-turns are not unprecedented when public opinion moves against a pinch point policy issue.

Beyond the political drama

Politics aside, the protests cut to the core of several interrelating policy issues, chief among them food security. Should farmers up the stakes and choose to strike, the government has already confirmed contingency plans to mitigate against likely food shortages. Any disruption to already fragile “just in time” food supply chains, which are a hallmark of the British supermarket industry, would have an immediate knock-on effect for the consumer, and in turn, the voter. This year of global elections has demonstrated that voters do not reward incumbents when food prices rise.

Yet given the 60/40 split of domestic and imported food produce respectively, the issue of food security is both desperately domestic and international. Russia’s invasion of Ukraine not only led to record levels of food inflation, hitting low-income households the hardest, but also a decline in business investment in the UK food and drink sector. Then there’s the issue of climate change. While India and Pakistan account for roughly 46% of UK rice imports, the government acknowledges that India is increasingly a climate vulnerable country. In short, a greater dependence on food imports arising from a possible collapse of domestic farming exposes the UK to yet more unpredictable geo-political and climate risks.

The British farming sector does not operate in isolation; it is critical to the UK’s broader rural economy, supporting industries such as agricultural machinery, agri-tech and innovation, and food processing. More than this, farmers are custodians of the UK countryside, contributing to environmental goals of biodiversity, carbon sequestration and sustainable land management and forestry. Though contentious, the Chancellor’s action prompts a broader conversation about agricultural reforms which align with national priorities and ensures the voice of the farming community is heard. The government has yet to set out substantive details but spoke of a new deal for farmers during the election campaign. Now in government, Defra Secretary Steve Reed has signalled a focus on trade deals undercutting low welfare and low standards; maximising public sector purchasing power to back British produce; and a land-use framework to balance nature recovery and long-term food security.

Whether Reeves doubles down or pivots on the Agriculture Property Relief depends on the government’s willingness to expend political capital to defend its decision. Labour’s instinct will be to fight on but the party finds itself on new ground. Its broad but narrow majority is part contingent on non-traditional Labour voters, many of them in rural areas. The MPs in these constituencies will have their eyes on a 2029 general election. Maintaining the rural vote and positioning Labour as the party of both rural and urban communities will be a challenge for the government. How Starmer and Reeves handle the ‘family farm tax’ could well define this iteration of the Labour Party. For investors and businesses alike, keeping abreast of these political battlegrounds, and preparing for the associated commercial risks and opportunities, will be important in making the case to a government that might well bend to a shift in public opinion.

Pensions reform: Will the Chancellor’s vision become reality?

The Chancellor’s first Mansion House Speech, has made it clear that pensions reform is the first item on the Treasury’s agenda for financial services policy and regulation. Following an autumn budget that caused some business leaders to question the government’s pro-growth agenda, Rachel Reeves’ speech emphasised the important role that pensions reform will play in delivering long-term economic growth.

As expected, Reeves reiterated her intent to pool Local Government Pension Scheme (LGPS) assets into a handful of megafunds. This proposal has been set out in the Pension Investment Review: interim report. The report, published by the Treasury and the Department for Work and Pensions, sets out the initial findings for ‘phase one’ of the government’s review. A consultation on this measure has also been launched alongside the report, offering stakeholders the opportunity to share views on new requirements for pooling and the governance of funds.

The government has also launched a separate consultation on a proposal to set a minimum size limit on Defined Contribution (DC) scheme default funds in the private sector. The government believes that this measure will encourage consolidation and allow savers to be moved more easily from underperforming pension schemes to schemes that deliver higher returns.

The government’s vision for the pooling of schemes has been welcomed by industry trade bodies, given the returns it could generate for savers and the scope it could create for pension funds to invest in longer-term assets. It is no secret that the Chancellor is keen for the UK to mirror the Australian system, where there is greater investment in infrastructure assets.

However, the government will still need to assuage stakeholder concerns about these proposals, given the disruption it could bring to the pensions market. The government will need to balance its own policy goals with market realities. If the government requires a significant portion of pension funds to be invested in the UK, how will industry stakeholders be impacted, given some will view the maximising of returns as their primary objective, rather than investment in British assets?

The government will also need to address concerns around the timeline for implementation. Given the pensions review is still in progress, there remains an opportunity for stakeholders to engage with the government to ensure that proposed policy changes support economic growth, and that the implementation process provides the industry with sufficient time to adjust to the new regime.

The government has announced that the final report of its pensions review will be published in Spring 2025 and that the Pensions Schemes Bill will also be introduced to Parliament shortly afterwards. By this stage, the government will need to have set out a roadmap for its reforms. It will also need to address how, if at all, to mandate the consolidation of the LGPS, and funds in the DC market, and whether new rules will be introduced to regulate pension scheme selection advice and investment consultancy.

These questions highlight the complexity of the task that the Chancellor faces. Despite these challenges, pensions reform remains at the heart of the government’s most important mission – delivering economic growth. The Chancellor’s speech and the newly launched consultations set out further details on the government’s vision for reform. The industry will now have the chance to scrutinise those plans and share its view on how to minimise implementation risks and maximise opportunities for growth.

GK Strategy is a political and regulatory consultancy firm supporting management teams and investors to understand and navigate complex policy changes.

We’d be delighted to share our perspectives on what the government’s pensions reforms could mean for you and how you can engage with policy debates. Please contact joshua@gkstrategy.com if you would like to discuss the reforms with the GK team.

The GK Post-Election Breakfast Event

GK Strategy Adviser Rebecca McMahon reviews the GK Post-Election Breakfast Event.

The coming weeks and months will see the new Labour government pressing ahead with its agenda for government, and getting to grips with a number of difficult challenges facing the UK, from sluggish growth, to growing NHS waiting lists, to precarious local authority finances.

GK Strategy was delighted to host a panel discussion this week looking at how the government will tackle some of these issues, and how it will prioritise its time and resources to deliver on its ambitious policy pledges. GK was joined by former Minister and Health Select Committee Chair, Steve Brine, and Head of Research at Labour Together, Christabel Cooper, who shared their insights into the government’s approach, and some of the inevitable obstacles it will face in the coming months.

Both panelists agreed that while the list of public policy challenges inherited by Starmer and his team is by no means a short one, Labour ministers will now be deciding on areas where urgent action is most needed.

Reforming the UK’s planning system was identified as one of the priority areas for Starmer’s new administration. Our two panelists noted that the new Government’s ambition in this area has already been illustrated by repealing the de facto ban on onshore wind, re-introducing mandatory housing targets, and pledging to update the National Planning Policy Framework via consultation by the end of the Party’s first month in power.

As a policy area with implications for multiple sectors – including housebuilding, the green economy and major infrastructure– planning reform to unlock private investment will be at the core of the new Labour Government’s agenda. As Chancellor of the Exchequer Rachel Reeves set out in her first speech following her appointment, its ultimate success will rely on “unlocking private investment that we so desperately need”.

Healthcare and the future of the NHS was another policy area which featured prominently. Steve Brine pointed out that under current spending plans, funding for the health service is projected to rise at a lower rate than during the austerity years. Meanwhile, the NHS Workforce Plan continues to be underfunded and the outcome of the Health Secretary’s talks with the junior doctors uncertain. He noted that while the Government will soon have to make difficult spending decisions, there would be an emphasis on creating an investor-friendly NHS to support Labour’s ambitions to “crowd in” private investment to improve efficiency and health outcomes.

There was a consensus that Labour’s perspective on the use of the private sector in supporting the delivery of public services is a pragmatic one. Labour’s ‘wide but shallow’ majority – achieving 64% of parliamentary seats on roughly 34% of the vote – means that the Party will need to reassure voters that it is making headway on its policy programme. Our panelists agreed that working with the private sector will be key to successfully demonstrating this.

Please do get in touch via rebecca.mcmahon@gkstrategy.com if you are interested in attending future events or would like to set up a call to discuss the year ahead in politics.