The UK food and consumer goods industry faces challenges on several fronts as the problem of persistent inflation is compounded by a significant labour shortage and changing regulations.
July’s Economics Viewpoint Report from IGD presents the spectrum of complex challenges business leaders face amid a landscape of low consumer confidence. The report recommends that the sector will require progressive leadership and a collaborative approach across the whole supply-chain to adapt to these changes.
While wage growth remains strong, IGD’s analysis shows that, in real terms, UK households will struggle for some time, detailing how 66% of lower income households are reducing spend on groceries and 54% are reducing the amount of food and drink consumed at home.
James Walton IGD chief economist, says: “We predict that food price inflation will slowly and steadily decline over the remainder of 2023, reaching approximately 9% by December. Although food price inflation appears to have peaked in March, widespread price cuts are unlikely at this time and a depressed volume of sales is expected until March 2024.”
Added to this is a deficit of labour needed to keep the food supply chain moving. DEFRA’s recently published Independent Review of Labour Shortages in the Food Supply Chain has acknowledged the scope of the problem. The review also recognises IGD’s key role in raising awareness of the huge range of employment opportunities within food and drink.
Walton continues: “Labour pressures may be the industry’s Achilles’ heel, driving costs while undermining capacity. Resolving this is key to long-term industry resilience and the focus on this issue will increase as it becomes more urgent. This comes as consumer confidence is low.”
Indeed, the latest consumer research conducted for this new report from IGD* highlights increased pressure on those with the lowest incomes, with 54% reducing the amount of food and drink consumed at home compared to 36% in the higher income group.
The report also outlines a plethora of policy considerations and changes that will impact the food and consumer goods industry for years to come. Among the changes is the implementation of the Windsor Framework, affecting regulations at the Northern Irish border, and the introduction of new border controls for animal products, as triggered by Brexit. The industry further expects operational challenges surrounding the Deposit Return Scheme and the Extended Supplier Responsibility this will incur. If implemented, the scheme will encourage reuse of drinks bottles in Scotland and new packaging processes.
As food and drink is both the UK’s largest manufacturing sector and private sector employer, decision-makers are increasingly looking for insight and intelligence to inform the recovery roadmap. July’s Economics from IGD Viewpoint Report comes at a pivotal time for policy, industry, and the consumer.
To download the Economics Viewpoint Report please visit the IGD website here.
