Written Evidence submitted the Provision Trade Federation and UK Seafood Industry Alliance (FS0060)





  1. This response is submitted on behalf of the Provision Trade Federation (PTF).


  1. PTF is a food trade association representing processors and traders in a range of staple dairy, meat and fishery products. We also provide the secretariat for the UK Seafood Industry Alliance (SIA), whose interests are covered by this submission.


  1. Collectively these sectors account for roughly 20% of UK household expenditure on food (around £24 billion a year) and support some 130,000 jobs.


  1. Our membership consists of businesses of all shapes and sizes which source supplies and raw materials from the UK, EU and elsewhere to meet demand here and in many existing third country export markets for value added products.


Executive Summary



What are the key factors affecting the resilience of food supply chains and causing disruption and rising food prices?


5. The essential components of successful food supply chains are:



Policy responsibility for these is spread across a number of different Government Departments, requiring a fully joined-up strategic approach if future food security needs are to be met. This must also address production and distribution across the whole of the UK, including Devolved Administrations.


6. The successive challenges of leaving the EU, the Covid pandemic and the current situation in relation to Ukraine have impacted to varying degrees on all of the above and frequently in cumulative ways, most notably in respect of labour shortages and energy and other input costs. Many of these issues are also common to global supply chains, complicating efforts to find alternative sources of supply. Recent extreme weather conditions, in the UK, Europe and elsewhere, have highlighted additional risks to future production from climate change and pressure on natural resources.


Specific examples of current difficulties


7. Different sectors and different businesses are inevitably impacted in different ways depending on their individual circumstances. But price rises driven by supply shortages in respect of feed, fuel and fertilisers are the most common underlying factors. Labour shortages and problems with transport and logistics also affect most parts of most supply chains.


8. The feed heading can be more broadly defined as including many crops for direct human consumption or processing ingredients, as well as those which are fed to animals to produce other forms of protein. Russia and Ukraine between them are major suppliers of grains and oilseeds to international markets and disruption of supplies is having global consequences, even for countries which do not import directly from them. That in turn is creating consequential shortages for alternative or substitute products. Shortages of sunflower oil have driven price increases for palm oil, rapeseed oil and olive oil (some of which have also been impacted by this summer’s heat and drought). These alternative oils may also differ in their technical and functional characteristics in food processing requiring adjustments to recipes and formulations as well as to ingredient – and in some cases allergen - listing on packaging. This too has been compounded by a shortage of packaging materials as Russia is major producer of wood pulp for cardboard and glass for jars and bottles.


9. Fuel covers road transport fuels as well as oil, gas and electricity directly used in manufacturing. It also covers use in cultivation (tractors and harvesters) as well as fishing vessels, many of which are having to tie up because their operation is no longer economic. Again, there are interdependencies and trade-offs as well as consequential effects. All forms of food processing are dependent on energy to heat, cool or store products at different stages and to provide steam and/or hot water for cleaning, sterilisation or other aspects of food safety and quality control. Many of these processes are also continuous, making them additionally vulnerable to interruptions in supply. Even where switching between fuels is technically possible (for example from gas to oil for boilers) this involves time, cost and regulatory permissions.


10. While recent Government announcements relating to the capping of energy prices for business users are very welcome, there is still considerable uncertainty as to how the system will operate and what will happen after the initial six-month phase comes to an end. Many businesses are likely to face costs at least double normal levels even with this support. The prospect of further price rises in the second half of next year makes it extremely difficult to make planning decisions for future production, even without all the other cost pressures still in the system. Again, it is the cumulative effect of all these different factors which is proving so damaging for business (and consumer) confidence.


11. Fertilisers are another ubiquitous feature of most farming systems, whether for plant or animal protein. There are supply shortages both for fertiliser products as such (Russia again being a major source at a global level) as well as price increases driven by the fossil fuel feedstocks on which they mainly rely.  Reductions in fertiliser use to offset price increases will in turn reduce yields adding to raw material shortages. Fertiliser production also gives rise to by-products such as CO2, ammonia or other chemicals which have their own uses and dependencies in food production. The UK and the EU are both suffering from acute shortages of CO2 at the moment as well as major price increases.


12. All these impacts are potentially cumulative. They apply to ingredients as well as to finished products. Apart from CO2 and chemicals there are shortages of components such as lactic acid and starches. The soaring energy costs of drying milk are leading to shortages of whey, skimmed milk and other powders widely used in many other forms of food manufacture


13. Estimates vary, but UK pig production may be facing reductions of at least 10% next year, with lower but significant falls for dairy and poultry. Increased imports may be able to make up some of this deficit. But this will depend on global availability and on the UK’s terms of trade with exporting countries. Imports may help mitigate price rises for domestic consumers. But if they undercut UK production, in respect of price and/or standards, that will make it more difficult for those sectors to recover as and when immediate cost pressures recede. Simply liberalising external trade to maintain market supplies will have significant longer-term consequences for domestic supply and our own future food security. Conversely, prioritising domestic production in the interests of increased national resilience, necessarily has implications for future trade policy.


14. Labour shortages are not unique to the UK, or to the food sector. But post Brexit changes in immigration rules have added to the difficulties caused by Covid driven disruption to employment patterns and the recruitment and training of replacements for those no longer willing or able to work in the industry. The situation in Ukraine has compounded these difficulties with many Ukrainian nationals either returning home or unable to take up opportunities in the UK. Despite recruitment and training initiatives on the part of businesses – and some temporary waiver schemes on the part of Government – these problems have not significantly eased. Reduced margins as a result of inflationary pressures and uncertainties over future profitability are also acting as disincentives to investment in automation or process re-engineering to reduce reliance on more traditional manual operations. Lead times on new capital works or site equipment have also increased because of other supply chain pressures.


15. Disruption to transport and logistics is another example of the collateral damage caused by developments beyond the control of the food sector itself. Covid resulted in massive dislocation of global container traffic, which has still to return to normal. Shipping costs remain at elevated levels, with less availability and longer delivery times, which themselves add further to cost pressures. Air cargo is similarly still suffering the effects of severe cutbacks during the pandemic. Road transport problems were exacerbated by driver shortages as well as Covid testing and travel restrictions – and in the case of the UK by new post-Brexit border controls. As with the shipping container model, road haulage is a circular activity, relying on return loads rather than simple A-B transport. Delays and extended turnaround times add further to cost pressures, as well as impacting on the predictability and reliability of delivery times which are essential to normal cost management and good customer relations. This has in turn increased demand for warehouse and storage facilities as a buffer to disruption, resulting in substantial price increases, particularly for chilled and frozen, exacerbated by higher energy costs. There is growing anecdotal evidence that many European businesses are no longer willing to source from UK suppliers because of this. Finding alternative markets further afield again adds to costs and risk, as well increased food miles.


16. Unrelated to the current series of external pressures, UK food manufacturers are also facing a series of increased costs as a result of earlier policy decisions, notably in relation to the plastics tax and plans for revisions to the Extended Producer Responsibility Scheme. Lack of clarity over future UK import controls (following the decision to replace the former Border Operating Model with a new Target Operating Model) and ongoing issues in relation to trade with Northern Ireland add to the list of uncertainties. There are a number of other unresolved technical issues in relation to trade with the EU resulting from the detail of the Trade and Cooperation Agreement, for example in respect of the re-export of products imported from the EU (so-called triangular trade).


What are the consequences for UK businesses and consumers?


17. All of these various challenges add directly and indirectly to the cost of doing business, including extra demands on internal company resources in terms of planning, risk management and additional administrative burdens. Without the ability to pass these through the chain, many existing business models may simply cease to be viable. For others, reduced levels of profitability will impact on future investment plans and the ability of the sector to innovate and grow. From a consumer perspective, higher prices for many products are inevitable in the short-term, with little prospect of a return to earlier levels, subject to whatever future trade deals the Government concludes with lower cost global suppliers (and the food security and other implications that would bring, including the for size of the UK’s food and farming base and its contribution to UK employment and economic growth).


18. Food accounts for a higher proportion of expenditure for lower income households, meaning that the effects of continued higher prices will bear disproportionately heavily on those of limited means – exacerbating the tension between ‘eating and heating’. As set out in the Food Strategy (and elsewhere) there is strong evidence of correlation between low incomes and poor nutrition, not only leading to health problems at an individual level, but also leading to significantly higher healthcare and societal costs for the country as a whole.


What is the outlook for UK food price inflation in the short and medium term? What policy interventions should the Government consider to manage these pressures?


19. Given the combined and cumulative effects of the factors involved, there seems very little prospect of significant improvement in the short or even medium term. The likely duration of conflict in Ukraine is clearly one of the major drivers of the present cost of living crisis. But even an early negotiated settlement will not necessarily bring immediate relief – and the defeat or disorderly withdrawal of Russian forces could well bring another set of difficult consequential issues.


20. The Government’s actions in relation to energy price caps for both domestic and business customers have been estimated as likely to reduce headline rates of inflation by up to 5%. But the financial disruptions following the announcement of the wider Growth Package may nullify some of those benefits, especially if there are significant rises in interest (and mortgage) rates in the weeks and months to come. A weaker pound will also increase costs for most businesses, other than those which rely mainly on export markets.


21. While some of the post-Brexit and post-Covid problems are slowly beginning to resolve, there would seem to be little prospect of enough improvement to make a significant difference in the short to medium term, and those improvements may themselves be impacted by current financial uncertainties – including industrial action related to pay claims to keep pace with inflation. The current reviews into shortage occupations, the seasonal worker scheme and the wider labour market (Shropshire) review would all need to massively accelerated and acted on to make any tangible early difference.


22. In the light of the intense and unprecedented pressures faced by both primary producers and processors, there may be a case for looking more systematically at existing frameworks relating to supply chain fairness and transparency and to relationships between suppliers and retailers (such as those set out in the Groceries Code). Again, this would need to happen very quickly in order to influence the current situation.


23. One area more rapid progress might be possible is in resolving outstanding issues in terms of the UK’s relationship with the EU, including in respect of the Northern Ireland Protocol. However, there may be some risk that the recently announced Retained EU law (Revocation and Reform) Bill could cut across this if it were to lead to significant regulatory divergence adding to potential non-tariff barriers and border frictions.


24. There is also a case for Government revisiting a number of previously announced policy initiatives (for example in relation to plastics and packaging) to see if they need to be paused or modified to help reduce cost pressures.


25. It is already being speculated that the Government may be looking again more widely at its plans for post-CAP support to farmers, including in respect of Environmental Land Management, sustainable farming and future land use, with a view to prioritising food production.


26.  But doing any or all of this in isolation runs real risks of unintended consequences. If nothing else, the current interlocking crises serve to underline the interdependencies across the entire food chain and the need for consistent joined-up policy making at food system level, as opposed to a series of specific interventions designed to deal with individual issues.


How are the rising cost of living and increasing food prices affecting access to healthy and nutritious food?


27. As already noted, lower income households spend a higher proportion of their money on food than the rest of the population. This means they are more likely to make purchase decisions based primarily on price rather than specific product qualities or attributes. As input costs and prices increase, this is likely to narrow the range of available choices at the lowest price points. While it is not axiomatic that fresh foods cost more, or that processed foods are lower in nutritional value, the relative logistical costs of supplying short-life products are typically significantly higher. Processed products can also be ‘value engineered’ to use cheaper ingredients, with more emphasis on carbohydrates than protein and potentially at the expense of important nutrients.


28.  Access to food also depends on physical access as well as price. Those with limited mobility, poor transport links to shops or lack of home cooking and storage facilities are again more likely to be constrained in the choices they are able to make, which may in turn compromise their ability to source the most health and nutritious foods. These issues have already been extensively examined in the independent review carried out by Henry Dimbleby, though by no means all his recommendations have been reflected in the Government’s strategy response. Present circumstances again call for this to be revisited – and at a systemic and integrated level alongside diet and health more generally.


How will the proposals in the Government’s food strategy paper affect:


1. The resilience of food supply chains?

2. The agri-food and seafood sectors?

3. access to healthy and nutritious food?


29. As published, the Food Strategy sets out a broad direction of travel and areas for further work (such as the Food Data Transparency Partnership) rather than a series of specific policy proposals aimed at solving the kinds of problems which supply chains are currently experiencing, future prospects for individual sectors or access to healthy and sustainable food.


30. It is therefore difficult to give a direct answer to these questions. Moreover, given the interdependence of many of these issues, there is a strong case for the Strategy as a whole to be reviewed.


31. PTF last year produced its own Sustainability Manifesto Changing for Good in which we set out what we believe to be a compelling case for transformational food system change on the path to a Net Zero economy, including in areas like transport, distribution, packaging, and energy use in heating and refrigeration and the promotion of healthier and more sustainable consumption patterns and diets. But even achieving Net Zero will not automatically guarantee future food security or ensure that everyone has access to the safe, nutritious, and affordable food they need. There are many other related challenges, including in relation to preventing further degradation of the natural capital on which all production depends.


Is the current level and target of food self-sufficiency in England still appropriate?


32.  Again it is difficult to answer this question on the basis of the Strategy as published. Nor is it clear that Government currently has a target as such, or to which products it might relate. The events of even the last few months have called into question many of the assumptions which have underpinned Government policy making over many years. They have also highlighted the need for collaborative and international solutions to what are global problems. A strategy seeking to address the specific needs of England does not seem to be an adequate response. We need a much wider ranging review putting sustainable food security and resilience front and centre at the heart of what we do.


How could the Government’s proposed land use strategy for England improve food security? What balance should be struck between land use for food production and other goals – such as environmental benefit?


33. For similar reasons, the answers to these questions need to come from a much more comprehensive analysis of global food security needs and the environmental externalities of food production at a planetary level based on principles of comparative advantage and taking account of developing climate change impacts. The implications for land use in England should be consequential to this rather than the point of departure.



September 2022