The writer is chief executive of the Food and Drink Federation
The world unites against the brutal invasion of Russia and Ukraine. The UK Government’s decisive action on sanctions has the support of the entire food and beverage industry as we watch an escalating human tragedy unfold before our eyes. We agree that a cost must be imposed on President Vladimir Putin and his government for their actions. Russia can not invade its neighbors and remain part of the global economy and trading system.
But our members are well aware of the implications that sanctions, trade restrictions and the supply chain disruptions that flow from them cost UK businesses and shoppers. This translates into food price increases and possibly temporary shortages.
The situation is more acute because the pandemic, during which global supply chains have struggled to meet unpredictable demand, has pushed up prices. With Ukraine and Russia – for various reasons – no longer exporting goods to most nations, global shortages are exacerbating existing inflation.
The UK is not dependent on food supplies from Ukraine and Russia, but we are suffering the impact of price increases due to the lack of world markets. This month, global wheat prices rose to more than 80 percent higher than a year ago. Sunflower oil – 80 percent of which is produced by Ukraine and Russia – is rapidly becoming unavailable, raising the cost of alternatives. Other products, such as the white fish and the wood pulp used in packaging and labels, are becoming scarce as supplies from Russia and Ukraine become dry.
Food and beverage manufacturers are in a bind. They can not see a loss this year in the inevitable increase in input costs – ingredients, raw materials, energy and so on. One company told me that it expects energy costs to rise by up to 500 percent this year. Businesses are urgently demanding further costs from their processes. But there are limits. With margins suddenly and heavily squeezed, higher prices are inevitable.
Britain already has a growing cost of living crisis. Now, food price increases will run alongside rapid increases in household bills, fuel and borrowing costs. Income is under great pressure, with low income families being particularly vulnerable.
The government can not do much about the prices on the global markets. But it could reduce food price inflation in the UK and eliminate the gaps on the shelves.
We have three suggestions. First, these pressures are infinite and the answer must be yes. Supply chains will be highly unpredictable in the coming months. The UK and devolved administrations need to allow the industry to safely use alternative products where ingredients are not available, often with little notice – starting with sunflower oil. If we want the products to flow freely, manufacturers need quick agreement on replacements.
Secondly, Britain’s estimated food security and resilience must be strictly monitored. Our manufacturers and producers are in every part of the country – and we want to keep it that way. We need a robust, cross-governmental mechanism, a National Food Security Council, to work alongside industry and enable us to respond collectively, and quickly, to the impact of supply chain disruptions. Some effects are already clear but others will take longer to understand. We need to respond to direct issues of ingredients and energy costs and the long-term effects of fertilizer, petrochemical and CO2 shortages.
Thirdly, ministers urgently need to remove the complexity and cost of future regulation. Businesses need to be able to focus on keeping flooded and feeding shoppers. From new packaging rules to where food promotions can be placed in stores, we call on ministers to pause, reflect and check whether the regulation is appropriate for purpose – and whether now is the time for additional costs to consumers to convince.
The government has more power over how the crisis in Ukraine has affected the UK than it thinks. It should use this power wisely.
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