Labour shortages are stifling economic growth for the UK’s food and drink producers

Food and drink is the UK’s largest manufacturing sector, bigger than aerospace and automotive combined and over the last decade, it has continued to have vacancy rates which are higher than those in wider manufacturing and national average at 4.8 per cent in Q2, compared with 2.9 and 3.3 per cent respectively.

The FDF’s State of Industry report has revealed that six out of ten (57 per cent) food and drink manufacturers have vacancy rates of up to 5 per cent, with mid-sized businesses which have a turnover of £26-£500 million experiencing the brunt of these shortages, with half of them reporting vacancies of up to 10 per cent, almost three times the national average.

Unfilled vacancies continue to affect a wide range of roles and skills, particularly for project engineers, scientists, lab technologists and plant engineering technicians, as recruits often overlook the food manufacturing industry. Other key roles, like production operatives also are struggling to attract candidates.

Ahead of the government’ s response to the Independent Review into Labour Shortages, expected to be published this autumn, food businesses are calling on government to sign up to the ten recommendations, which will require greater collaboration with the industry and the education sector to tackle labour shortages by focusing on recruitment, retention and developing skills and technology.

FDF Director for Growth Balwinder Dhoot said:

“Significant labour shortages have cost businesses £1.4bn over the last year, with companies being forced to leave vacancies unfilled and reduce production – all of which contributes to rising wage bills, higher prices and stifles growth, which is vital for a strong economy.

“Investment is essential if we are to build a sustainable and resilient food supply chain which supports the economy and feeds the nation. Our members are unable to expand their operations, principally because they haven’t got the staff.

“We need Government to work with industry to implement all ten recommendations in the Independent Review into Labour Shortages and to deliver the Prime Minister’s commitment to grow the economy. Our members are really clear that the Government’s plan to extend ‘not for EU’ product labelling on a UK-wide basis will hamper growth, hitting investment, exports and jobs while increasing consumer prices and restricting the choice of products, so would urge them to reconsider their approach.”

The State of Industry report also revealed that eight out of ten of the UK’s biggest suppliers (by turnover) think that the government’s plan for UK-wide ‘not for EU’ product labelling should be scrapped to avoid damaging impacts for UK businesses and shoppers. New arrangements to supply Northern Ireland (the Windsor Framework) come into effect in October and while well-intentioned, the plan to extend ‘not for EU’ product labelling to Great Britain will inadvertently lead to further price increases for consumers.

Despite this challenging landscape, the FDF has found business confidence is starting to move in a more positive direction, climbing 18 points in the last period. This reflects perceptions that market conditions have stabilised after a period of volatility and unprecedented supply chain disruption following three structural shocks in quick succession – Brexit, a global pandemic and the war in Ukraine – which has disproportionately impacted food. This led to substantial upward pressures on all cost elements of the industry, from ingredients, labour and packaging to energy, transport and logistics.