The new Prime Minister must back the food and drink industry
05 August 2022
City AM have published the following opinion piece by the FDF Chief Executive Karen Betts:
Read Karen's comments in full below.
Inflation is soaring and the UK’s food and drink manufacturers are under pressure like never before. No one can remember such sustained, relentless price rises across all our inputs – everything, from energy and ingredients to transport and wages, is more expensive. With food price inflation now at 9.8%, the question on everyone’s lips is – how much further will it go?
My view is that food price inflation will go well into double figures. That’s because, broadly, inflation in the cost of the goods our industry is buying at home is running at over 10%, and it’s running at over 20% in the goods we buy from overseas.
UK food and drink manufacturers are not passing all these costs on. Instead, they are squeezing their margins, cutting costs wherever they can – from marketing budgets to withdrawing some products altogether. Companies are doing this to stay competitive and keep food affordable.
So I agree with Rishi Sunak when he said last week that “we need to stamp out inflation quickly.” But I’m concerned that he went on to say: “We want to make sure that the supermarkets and all the other people in the supply chain are being fair in how they price these things and no one is taking advantage of the situation to pass on price rises that aren’t necessary.”
Let me reassure Mr Sunak that no one in our industry is taking advantage of the cost-of-living crisis. Quite the opposite. Many companies are down to wafer-thin margins, and the viability of some businesses is threatened. Not every company will make it through. All politicians should know that, with the UK grocery environment already one of the most competitive in the world, no one is passing on price increases until they’re forced to.
The Food and Drink Federation has recently surveyed our members and found that business confidence is at the lowest level that we’ve ever recorded. Businesses are stretched to their limits.
We could, therefore, do without the digs. We’d prefer the Conservative leadership candidates to ask us what government can do – because there are things ministers can and should be doing to help contain inflation. We have three key asks, which we’ve made repeatedly to government and have put to both Rishi Sunak and Liz Truss.
First, government can support food and drink businesses in investing out of this crisis and into growth. Our industry has a productivity problem, not least since food suppliers operate on low margins and short-term contracts. With the right thinking and agile government support, there’s a huge opportunity to modernise our industry, tackle acute labour shortages, hasten our transition to net zero, and reap a productivity dividend.
Second, government needs to regulate with care and attention. Our experience post-Brexit has been more red tape, not less, and regulation has tended to be poorly consulted on, poorly designed and poorly executed. For a business, complexity means cost. Post-Brexit regulation is costing us more and delivering less. The government, and its civil servants, badly need a new approach.
Third, the UK has a labour and skills challenge. Our industry struggles in particular to recruit engineers – mechanical, software and digital. We urgently need both a short-term answer, through smart immigration policies, and a long term one where the UK better fosters its own talent.
It was great to see Liz Truss commit this week to supporting our sector by cutting onerous bureaucracy and offering ways to ease our labour struggles. This is a fantastic start, but the new government must work with industry to ensure that solutions are genuinely fit for purpose.
The UK has a brilliant food and drink manufacturing sector. We’re the UK’s largest manufacturing industry, with companies and sites up and down the country. We’re the lifeblood of communities, employing almost 500,000 people who make the fantastic range of food and drink that everyone, everywhere across the UK, can buy in shops, train stations, cafes, leisure centres and along our high streets every day. Not only does this sustain us, but it gives us all enormous pleasure.
So over to you Rishi and Liz. Let’s hear it for how we nurture our industry and its future, rather than jumping to conclusions about one of the crown jewels of the British economy.