In the past year, the Food and Drink Federation (FDF) has conducted an analysis revealing that labour shortages have resulted in an estimated loss of £1.4 billion for the industry in terms of output. Specifically, in the last quarter alone, the cost has been £192 million.
The food and drink sector is the largest manufacturing sector in the UK, surpassing the aerospace and automotive industries combined. Throughout the past decade, this sector has consistently experienced higher vacancy rates compared to wider manufacturing and the national average. In the second quarter, the vacancy rate stood at 4.8% for food and drink, while it was 2.9% and 3.3% for wider manufacturing and the national average, respectively.
According to the FDF’s State of Industry report, 57% of food and drink manufacturers have vacancy rates of up to 5%, with mid-sized businesses (with a turnover of £26-£500 million) bearing the brunt of the shortages. Half of these mid-sized businesses reported vacancies of up to 10%, nearly three times the national average.
Labour shortages continue to affect a wide range of roles and skills in the industry, especially in positions such as project engineers, scientists, lab technologists, and plant engineering technicians. These roles often go overlooked by potential recruits. Even positions like production operatives are struggling to attract candidates.
Labour Shortages
Prior to the anticipated autumn release of the government’s response to the Independent Review into Labour Shortages, the FDF is calling for the implementation of the review’s ten recommendations. To address the labour shortages, the successful implementation of these recommendations will require greater collaboration between the industry, the education sector, and the government. The focus should be on recruitment, retention, skills development, and technology.
The FDF’s director for Growth, Balwinder Dhoot, emphasized the significant impact of labour shortages on businesses. The past year has seen these shortages cost businesses £1.4 billion, forcing companies to leave vacancies unfilled and reduce production. These outcomes lead to rising wage bills, higher prices, and hindered growth, all of which are vital for a strong economy.
Dhoot stressed the necessity of investment to build a sustainable and resilient food supply chain. However, the inability to expand operations persists due to the lack of staff. The government’s plan to extend ‘not for EU’ product labelling on a UK-wide basis is viewed as a hindrance to growth by FDF members. They assert that this approach will negatively impact investment, exports, jobs, consumer prices, and product choice, and urge the government to reconsider.
Increased cost pressures
The State of Industry report also discovers that eight out of ten of the UK’s biggest suppliers, ranked by turnover, believe that the government’s plan for UK-wide ‘not for EU’ product labelling should be abandoned to avoid detrimental effects on UK businesses and consumers.
According to the FDF, the implementation of new arrangements for supplying Northern Ireland, known as the Windsor Framework, in October will unintentionally result in further price increases for consumers if the ‘not for EU’ product labelling is extended to Great Britain.
Despite the challenges faced, the FDF notes a positive shift in business confidence, with an 18-point increase in the last reporting period. This optimism reflects the perception that market conditions have stabilized after a period of volatility and unprecedented supply chain disruptions due to Brexit, the global pandemic, and the conflict in Ukraine. These factors have disproportionately impacted the food industry, leading to significant upward pressures on all cost elements, including ingredients, labour, packaging, energy, transport, and logistics.
