FDF welcomes government growth pillars, amid major sector financial challenges

The UK’s Food and Drink Federation has signalled that it has welcomed the Chancellor’s core pillars of economic growth – Enterprise, Education, Employment and Everywhere, with the major Spring budget due today, with the industry facing core tests, writes Neill Barston.

As the key organisation, which represents many major firms including within snacks and confectionery markets, noted, the overall sector contributes a huge total of £30 billion to Britain’s economy, namely through employing around 450,000 as well as investing £21 billion in capital and R&D projects in the last five years.

However, as the FDF has noted, there are particular challenges facing the industry, as latest figures reveal that it lost 3,000 jobs in Q4, following a decline in employment of 7,000 jobs in the preceding quarter. This is a fall of 0.9% in the industry’s labour force compared to Q3 2023, or 0.7% compared to Q4 2022. Total employment in the industry now stands at 450,000.

Furthermore, the FDF expressed concern that among core issues for the sector were the fact that “severe staff shortages persist, across a wide range of roles and skills, from highly skilled engineers and scientists to machine operatives and packing operators.” Manufacturers reported 7.0 unfilled positions for every 100 jobs in Q4, down from 9.1 in Q3, but nearly double the UK average of 3.8.

As the organisation noted, the fall in employment is likely to have been caused in large part by companies struggling or going out business. In 2022, there were 244 insolvencies in the industry, exactly double the number seen in 2019.

In addition, the FDF observed that recruitment slowdowns were related to businesses putting projects on hold and removing job adverts as economic uncertainty and a slowdown in consumer spend take hold. This was mirrored by food volume sales continuing to decline in February. According to BRC-KPMG figures, food sales rose by 8.3% over the three months to February. With inflation over 16%, this implies a loss in volumes of about 7%. This would negatively impact growth prospects for manufacturers that are seeing falling demand for their products.

In light of such challenges, the FDF has produced an agenda for areas that it is targeting working with the government that hone in on regulatory reform, wider fiscal support for the industry, as well as improving import and export conditions in the wake of Brexit, which has, as previously reported, left many business facing an unsustainable burden of additional red-tape and administration costs.

The FDF’s recommendations included –

1. Boost productivity and stimulate business investment

Make permanent the 100% first year capital allowance
Review the R&D tax credit system
Reform the Apprenticeship Levy
Widen the scope of the Shortage Occupation List review to include acute shortages at all skills levels and greater flexibility on the salary thresholds to help ease immediate pressures
Establish a similar scheme to the Reformulation for Health Programme and support smaller businesses to access technical support and trial new innovative solutions that can improve the health of products.
Reduce inflation by supporting the food and drink industry to help manage high energy costs
Support food and drink to invest in energy efficiency and decarbonisation
2. Prioritise regulatory reform

All too often businesses in our sector are grappling with regulation which is overly complex or risks failing to meet its stated aims. Our sector is highly regulated – rightly so – and as such British food and drink is prized for its quality and safety. However, shoppers end up paying the price for poor regulation when this drives up costs and those costs have to be passed on.

Extended Producer Responsibility (EPR) is the set of policies that, if implemented correctly, will ensure manufacturers (or producers) take responsibility for managing their packaging waste and that the UK establishes a world-leading recycling system for plastics and packaging. Producers, therefore, have a clear interest in ensuring the system works – that is, in a way that’s good for the environment, for businesses and consumers. Current policy proposals will not create an efficient and effective EPR scheme, nor attract investment, and will cost households over £1 a week.
Without large scale chemical recycling taking place, it will be impossible to supply sufficient recycled packaging content to the market. ‘Mass balance accounting’ is needed to unlock the potential of chemical recycling and immediately introduce this measure rather than delaying for several years.
3. Improve trade facilitation

We think the UK can unilaterally act to drive substantial improvements for businesses at the border, boosting the competitiveness of our exporters and ensuring access to the ingredients and raw materials businesses need to import if there is a single Government border approach to underpin the single window.

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