UK Food Companies Report Increase in Ingredient Prices Amid Worries Over Brexit

12 Oct 2016 --- More than two thirds of UK food and drink companies are less confident about UK business following the country's vote to leave the EU, with the majority reporting increased ingredient prices, while some EU employees based in the UK have said they now feel "unwanted", according to a new survey.

The survey has been conducted by the Food and Drinks Federation (FDF), the trade body which represents the UK's food and drinks industry and whose members include PepsiCo UK & Ireland and Associated British Foods.

It coincides with figures from UK retailers showing food sales at their highest levels since 2013, indicating a disparity between business and consumer confidence.

The survey took place between September 16 and October 7, just a few months after the June 24 result of the referendum, in which FDF members voted to remain in the EU.

More than two thirds (69.5 percent) said they were less confident about the UK business environment post-Brexit, compared to around one in ten (11.2 percent) which said they were more confident.

The negative sentiment was slightly more acute in small to medium enterprises (SMEs), 70 percent, compared to large businesses with 69 percent expressing concern.

The majority of those polled cited concerns about increased ingredients prices, a drop in product margins, and concern about EU workers working in the UK.

"“We have already seen our cost of raw materials increase by 20 percent," said one respondent. Another said: "“Management has halted new investment in UK facilities, preferring instead to invest inside the EU.” 

However, there were some positive responses, such as those businesses which had seen a boost to exports amid a decline in the value of sterling.

Over 60 percent of those surveyed said that EU employees had expressed concerns about the result of the referendum, with over seven percent of businesses stating they employed EU employees who now want to leave the UK.

“Our EU employees feel very unwanted and uncomfortable. Some have said that they will return to their home country as soon as they can," one respondent said.
“20 percent of our staff are non-UK nationals and one has been verbally abused in the street. They are all looking to me for answers," another responded.

More than six in ten (63 percent) said their products margins had decreased while over 20 percent said capital expenditure had decreased.

More than three quarters (76 percent) reported increased ingredient/raw material prices post Brexit.

“Our margins have dropped 12 percent on products manufactured in the UK and the cost of imported raw materials is up 15 percent. We have not experienced any increase in sales, " a respondent said.

However, the majority of business reported that key metrics such as volume of exports outside the EU and volume of exports to the EU was unchanged after Brexit.

Looking ahead, 81 percent said they expected ingredient prices to rise over the next 12 months while 69 percent expected product margins to be down.

John Stevenson MP, Chair of the APPG for Food and Drink Manufacturing which meets, said: “Brexit will present both challenges and, through sensible negotiation, opportunities for businesses in the UK's largest manufacturing sector – food and drink. “

“Government and industry partnership has never been more important to the future of this vital sector. It is essential that colleagues in Government go into negotiations equipped with a clear understanding of this sector's priorities, which is why open dialogue and the active participation of food companies and their representative bodies in this debate is so essential. 

“Food and drink is a national success story, with massive untapped opportunity to boost exports and improve its already impressive productivity performance, delivering even more for the UK economy.”