Confidence among UK food businesses plummets by 55% amid Brexit and COVID-19 fallout
10 Dec 2021 --- The UK’s F&B sector is burdened with a significant drop in net business confidence, as industry is still aggravated by severe supply chain disruptions and unabated labor shortages faced throughout the COVID-19 pandemic and Brexit. “Businesses are full of pessimism and a further decline in business confidence is anticipated,” concedes the nation’s Food and Drink Federation (FDF) in its latest report.
Industry confidence fell by 55% in Q3 2021, dropping to 51%. This is flagged as the lowest net confidence rate since the height of the pandemic in Q2 2020 (-65.2%) and the biggest drop in confidence since the FDF first began reporting in 2018.
FoodIngredientsFirst reached out to the organization for insights into the compounded food chain crises.
Labor supply issues are not likely to resolve soon, underscores the FDF.
“These results demonstrate that confidence levels across our sector have been hit by continuing supply chain disruption,” Ian Wright, FDF chief executive.
“On top of this, the confection of increasing uncertainty about Omicron, the UK’s changing trading relationships, and the re-ignition of inflation, all threaten to undermine resilience across the sector,” he stresses.
“Many businesses now expect disruption and reduced service levels to continue right through 2022 and into 2023.”
The FDF conducted its thirteenth consecutive quarterly business confidence survey between October 21 to November 11, this year. It received responses from 34 members – accounting for more than 150 brands – with a combined turnover exceeding £6.8 billion (US$9 billion), located in all UK regions.
Over half of responses were from small and medium-sized enterprises.
Key findings from the report
Severe supply chain disruptions were named the biggest cause for concern, particularly the transportation of goods with 93% experiencing delayed or missed outbound deliveries and 75% reporting delayed or missed inbound deliveries.
In August, British meat suppliers looked into hiring prisoners as an approach to bolstering their industry’s dwindling workforce. But processors are still presented with the challenge that different cuts require specific skill sets from different types of butchers.
Labor supply issues are not likely to resolve soon, with half of respondents surveyed by the FDF indicating they are expecting the permanent supply to decrease and 54% saying they expect the temporary supply to decrease in Q4 2021.
Product margins remain squeezed, driven by wide-ranging supply chain disruption and rising production costs.Labor shortages also remain across a range of roles in the food supply chain. The most common shortages were heavy goods vehicle drivers (HGV), temporary agency workers and process, plant and machine operatives.
Pressingly, the UK’s widening labor gaps have led to endemic food waste, as crops have been left to rot in the fields, according to previous reports.
Earlier this year, in an effort to plug the labor drain caused by the “pingdemic,” the UK government introduced a new daily testing scheme that allows many food workers to continue working, regardless of vaccination status.
Less availability for consumers
Product margins remain squeezed, driven by wide-ranging supply chain disruption and rising production costs.
Britain’s turkey producers were the latest victim of Brexit and pandemic fallout. Poultry associations recently warned that stocks of Britain’s favorite Christmas centerpiece might be running low this year, echoing previous warnings that critical staff shortages would lead to this shortcoming.
A few months ago, Nando’s ran short of its classic menu staple peri-peri chicken wings, which prompted the restaurant chain to shutter 45 of its 450 UK locations in the UK. KFC also faced significant supply cuts without specifically naming any of the affected foods or packaging.
The FDF reports that an “overwhelming majority” of businesses anticipate continued price rises, with 97% of respondents expecting consumer price inflation to increase in Q4 2021.
Around half of respondents expect a further decrease in business confidence in the final quarter of 2021.
By Benjamin Ferrer
