FDF warns of supply chain crisis as small businesses feared to go bust

Food supplies will be threatened if small businesses go bust this winter as a result of soaring energy costs, the UK’s leading food industry group warned on Tuesday (6). 

Karen Betts, the chief executive of the Food and Drink Federation, told MPs on the business, energy and industrial strategy (BEIS) committee that it is going to be a really difficult winter.  

“Our industry feels caught in the eye of a pretty powerful storm at the moment,” she said. “We know we have a huge responsibility to keep prices affordable, but all of our manufacturing companies are experiencing exponential rises in their inputs, whether that’s the cost of ingredients, the cost of energy, the cost of raw materials, the cost of transport, the cost of labour.” 

Currently food price inflation is at 12.7 percent, and it’s expected to continue to rise over the coming months, driven by soaring energy and ingredient costs and rising wages. Some FDF members are seeing rises of between 400 and 500 percent in their energy bills. 

Betts was also keen to point out the precarious situation smaller businesses in the food and drink supply chain find themselves in due to inflation. If the worst were to happen and some companies couldn’t make ends meet, there could be a “tightening of supply in certain products”. 

The pandemic and the war in Ukraine have put huge strain on the food and drink supply chain, and now the high energy costs are further squeezing companies that are energy intensive or are reliant on coal and CO2. 

“We’ve had that question of resilience for more than a year now,” Betts said. “Whilst some work has been done by the government and by companies to introduce more resilience into the system, it is still pretty precarious and that will feed into price rises. So it is a worrying time.” 

Betts went on to say that companies have been cutting costs and introducing energy efficiencies wherever they can to keep food available, but the government needs to step in with more support for households in paying their energy bills too. 

“Our industry is struggling to absorb the level of regulation that’s coming at us on things like plastics and packaging – where we know we have got to get to good outcomes and we know we’ve got to get there quickly,” she said. 

“We need a review of what the priorities are here, more support for these investments that need to be made in the green transition, and more listening to industry on how progress can be made in a more efficient and streamlined way than it’s currently envisaged by government.” 

The committee’s chair, the Labour MP Darren Jones, asked whether supermarkets would be left with shortages of some food or drink items if companies went bust because of high energy bills.

Betts responded: “If that were to happen, yes, there will be consequences, there will be tightening of supply in certain products, absolutely. There are worries about SMEs [small and medium-sized enterprises] having a particularly hard time with this. Much of this will be around cashflow.”