Written evidence submitted by the Food and Drink Federation (FDF) (COV0068)

Introduction

 

  1. This submission is made by the Food and Drink Federation (FDF), the trade association for food and drink manufacturing. Food and drink is the largest manufacturing sector in the UK (accounting for 19% of the total manufacturing sector) turning over £105bn per annum; creating GVA of £28bn and employing over 430,000 people.

 

  1. The FDF welcomes the opportunity to respond to the Environment, Food and Rural Affairs (EFRA) Select Committee’s inquiry. We are proud of how the UK’s food and drink manufacturers have swiftly responded to new demands and pressures brought about by the COVID-19 crisis and adapted quickly to minimise disruptions in the food chain. The FDF’s priorities have been three-fold: to maintain food and drink supplies through Covid-19, to make sure our essential workforce feels secure and protected and to help as many of our businesses as we can through this period.

 

  1. Food and drink is part of the UK’s critical national infrastructure and the COVID-19 crisis has brought into sharper relief than ever before the importance of a continuous, safe and secure food supply chain. The UK’s food and drink manufacturers have demonstrated great resilience to keep nation fed at this difficult time and their essential workforce should be celebrated as ‘hidden heroes’.

 

  1. While demand for some companies and products has increased greatly, other businesses – particularly those who serviced hospitality or speciality retail and have seen their customers disappear – are now facing extremely difficult times. Government action is needed to protect food suppliers adversely affected as a result of decreased demand in the foodservice sector and steps to enable takeaway and restaurant businesses to re-open whilst adhering to public safety advice.

 

  1. The FDF has appreciated the level of excellent engagement with the UK and devolved governments, with daily ministerial contact. The FDF has continued to convene on a twice-weekly basis over 50 different food and drink associations to share intelligence with Whitehall officials. This continued dialogue with the UK Government – and likewise with the Scottish and Welsh governments – has been extremely valuable in raising issues for food and drink manufacturers and in ensuring their concerns are heeded. We have also worked closely with members of the Opposition parties, particularly the Shadow Defra team.

 

  1. As part of our support for food and drink manufacturers, we provide a weekly webinar, daily information alerts and have extended Covid-19 support to non-members to include informative web pages and a dedicated enquiry inbox, through which we have handled over 400 enquiries to date. We have arranged webinars with our affiliate members in the legal sector to provide advice on furloughing and safe factory operations and these webinars have attracted on average 300 participants from member and non-member companies.

 

  1. As one of the few UK industries who has maintained operations and production through the crisis, we believe that we have learnt valuable lessons which we hope will be of use to other industries as we begin to plan for a possible restart.


The UK Government’s response

  1. The Covid-19 crisis is unprecedented and it is understandable that some processes will be found wanting. The FDF has been involved in daily discussions with ministers from numerous government departments – both at UK and devolved level – to highlight daily emerging problems and to work constructively to resolve them. Defra in particular have provided exemplar support. However, there are some examples we believe will be helpful to highlight where co-ordination and clarity across Whitehall could have been improved and where lessons may be learned for the future.

 

  1. We have been particularly disappointed by the delay and lack of practical detail in the guidance for food and drink manufacturers which arises from different government departments. In some cases, we have seen headline announcements but the detail underpinning this is slow to follow, resulting in uncertainty within companies of what measures to implement and next steps. This has meant that companies have had to use their best judgement in order to continue operating, while awaiting official advice on safe practices, for example on operating procedures in factories where social distancing by two metres may not be practicable.

 

  1. The guidance that is published has not always been fit for the sector. For example, the Government Guidance for Employers published in February 2020 was not suitable for food and drink manufacturing. The long awaited Public Health England guidance on social distancing in the workplace was published in April, after a week of promises that it was ‘imminent’. However, it contained limited practical information and less detail than the guidance already published by Food Standards Scotland and Northern Ireland Food and Drink Association several weeks earlier. Similarly, The British Frozen Food Federation has raised concerns with the delay and detail of guidance provided by the Food Standards Agency on bulk freezing of ambient and chilled foods. Guidance to industry on certain regulatory derogations sometimes ran several days to weeks behind guidance issued to competent authorities, leaving companies unclear about what is permitted.

 

  1. Furthermore, new guidance inevitably leads to ‘unforeseen circumstances’. While most of these have been swiftly resolved, each case requires close work with government to unpick the issues and provide the necessary clarity and reassurance to businesses. For example, the Health Protection (Coronovirus Business Closure) Regulation included the closure of workplace canteens. For some of our factory sites this would have meant employees had no access to food, drink or rest areas, which would have necessitated the closure of the factory. FDF worked with companies and government to ensure canteens could stay open, with appropriate social distancing measures in place.

 

  1. Looking ahead, it would be helpful to have a better understanding from the outset of the level of detail government guidance might be expected to contain and a more accurate view of timescale of delivery. This will help industry to understand whether to wait or to develop its own best practice. In the instances cited above it did not appear that the relevant departments liaised with industry, and they may have found this helpful both in terms of speed and usability of the guidance.

 

  1. We strongly welcome the recognition of food and drink production workers as essential to the nation, and the recent extension of the antigen test to workers in our sector. We fully understand and support that while testing capacity was limited, priority was rightly given to NHS staff. It should still be noted that the lack of testing availability resulted in higher than normal absence levels and an inability for a company to determine which reported absences were actually suffering from Covid-19.

 

  1. With respect to testing it seemed public announcements also ran slightly ahead of both capacity and the final procedure being in place, which caused confusion for companies. It is important government recognises changes to advice to essential workers, or the public at large, can have significant impacts to companies. In this instance, a complicated interim procedure with multiple guidance documents was circulated. A day later a final procedure went live, although the final system did not have guidance for a few days after launch. Changing systems are hard for employees to keep on top of, especially when public announcements are made and employees are rightly asking questions.

 

  1. The sudden changes brought about by Covid-19 have required swift action on a range of employment and access to labour issues. On the whole, FDF’s view is that the UK Government’s response on these issues has been more satisfactory than on issues around workforce safety outlined above.

 

  1. We were pleased that government included ‘those involved in food production, processing, distribution, sale and delivery’ as one of the critical sectors whose key workers would continue to be able to access childcare. We are also pleased that government heeded the advice of FDF and others to not delineate this broad definition further. This has allowed interconnected parts of the food chain to continue to operate and meet the unprecedented demand from consumers and shoppers experienced in the early weeks of the Covid-19 crisis. Without this designation, absence rates in food and drink manufacturing would have been far greater which would in turn have had a negative effect on output volumes. We would also contrast this approach with the more problematic approach taken in Scotland where individual local authorities were able to set their own key worker lists, leading to confusion, mixed messaging, and inconsistency.

 

  1. The Coronavirus Job Retention Scheme (CJRS) is another welcome intervention, though rapidly changing and sometimes contradictory guidance updates have been challenging and at time of writing we are not yet able to tell if the payment of grants through the scheme has been successful. While as an overall sector food and drink manufacturing has been less impacted by the reaction to Covid-19 than others, individual companies have still faced falls in revenue that have led to them turning to the CJRS to maintain their current staff on payroll. Moreover, CJRS will have maintained short-term consumer demand for those sectors of the economy continuing to function by continuing to fund 80% of wages. It was welcome that government, on the advice of FDF and other food chain membership organisations, allowed furloughed workers to take on additional work in the food chain. While at present FDF members are reporting manageable levels of absenteeism, FDF are working with other food chain membership organisations to support Defra’s Pick for Britain campaign to ensure sufficient seasonal agricultural workers are recruited from the domestic workforce.

 

  1. Outstanding issues with the furloughing scheme include: ensuring recruitment agencies are supported to furlough their workers to ensure the continued operation of compliant labour providers, when the scheme will end, government providing more guidance on the use of rotational furloughing to allow flexibility, and whether there is scope for part-time furloughing (especially as a transitional ‘restart’ measure).

 

  1. Other welcome measures taken by the government include the Home Office moving to allow remote right-to-work checks and visa extensions and Defra officials supporting the FDF with guidance on the working time regulations during the outbreak. One key outstanding question for FDF is whether the Statutory Sick Pay refund scheme which is currently in place for SMEs can be extended to all businesses in critical sectors as this is of particular importance for labour providers working in food and drink manufacturing and the wider food chain.

Access to sufficient, healthy food

  1. As food and drink manufacturers, our role is to ensure sufficient food and drink is available to fulfil the demands of UK shoppers and consumers – whether sold through the supermarkets, the convenience stores who play an essential role in serving the most remote and vulnerable communities, or the food delivery/ hospitality outlets who are still operating. Ensuring a range of products – whether frozen, tinned or dried goods – has enabled people to maintain a varied diet including fruit, vegetables and fibre, even if shopping occasions are reduced and there is less fresh produce in the home.

 

  1. Food and drink and manufacturers worked exceptionally hard to respond to the huge and unpredictable spikes in demand for food, particularly at the outset of the crisis, delivering unprecedentedly high production levels while managing increased absence and appropriate social distancing measures. Some companies de-layered production cycles to focus on a reduced range of key products, while delivering output at over 100% during the peak panic buying period, ensuring shops were able to continue to restock their shelves.

 

  1. Most companies typically report absence levels in single digit percentages, but the early stages of the crisis saw some members’ absence levels exceeding 20%. FDF moved swiftly to work with labour provider and recruitment trade associations and developed short-term professional affiliations with several online job apps with a presence in hospitality to facilitate the transfer of labour between sectors. Some members have utilised these channels, though most members who have taken on new staff appear to have utilised their normal recruitment channels and partners. Although absence levels are currently still higher than would be typical, three-quarters of members now have absence levels of 10% or lower and members are currently managing to meet demand. FDF will continue to monitor this on a weekly basis.   

 

  1. We believe the food is available to support the population to achieve a healthy and balanced diet – however, there are issues with distribution and access, particularly for those who are most vulnerable. For example, there are concerns about how blind consumers safely navigate stores. For allergic consumers it is important they can read the ingredients decleration which contains the allergen information, which may involve picking the food up to read the back of pack. Best practice guidance has been slow to emerge about how best to help these consumers, and perhaps could be expediated in the future by working with relevant consumer groups who understand particular needs.

 

  1. A number of FDF members have worked closely with UK Government to provide supplies for the food parcels for ‘extremely vulnerable’, shielded citizens. Many companies are individually donating to food distribution networks and as a collective the industry have been working on solutions to aid food and drink producers to repurpose their orders from hospitality, to retail and vulnerable groups. A number of support routes have been identified to aid the repurposing of food and drink. These include commercial, government, freezing and donations.

 

  1. One notable industry intervention to support one of the most vulnerable groups has been a collaboration between the Institute for Grocery Distribution (IGD) and food surplus charity FareShare. IGD has worked across food and consumer good companies (including many FDF member companies), FareShare, and other charitable food redistributors, to safeguard a consistent supply of food. Over 40 companies have so far come forward to offer their support by donating product and funds. FareShare will now coordinate these offers, not just for its own national redistribution network, but also to foodbanks and other charity food redistributors.

 

  1. A further industry intervention is the Feed Britain Portal. This aims to help those who don't have easy access to food and create new opportunities for food producers, farmers and wholesalers whose business have been threatened by the collapse of the restaurant industry.

Disruptions in the food supply chain

Concerns regarding logistics and freight

  1. Food and drink producers report that their supply chains have been robust and that the essential movement of goods has continued during this crisis, often a little more slowly than would otherwise be the case. Where problems have arisen, these have tended to be isolated issues rather than affecting all operators.

 

  1. The reduced capacity in freight, logistics and ferry capacity has meant that movements of goods take longer and costs are increasing. The reduction in passenger footfall and the subsequently reduced passenger flights has had a similar impact. This has meant businesses have either had to accept some delays or have redirected their goods.

 

  1. Reduced footfall on ferries has led to the number of sailings on key routes being reduced and this has raised concerns around the commercial viability of some routes, both between the UK and Ireland, and with mainland Europe. The Irish Government has already moved to provide additional support for ferry operators and we believe that the UK’s Government may need to take similar action to ensure key trading routes remain open.

 

  1. There are concerns that further pressure on the supply chain could lead to disruption. Colleagues in the logistics sector report that just under half of the road haulage fleet is no longer in use, with a large share of its workforce furloughed. We believe that this situation needs to be carefully monitored to ensure the effective distribution of goods can continue, without a functioning logistics sector, we would see food not delivered and this would further threaten the functioning of storage facilities, ports and warehouses which are already reaching capacity.

Border issues facing essential imports

  1. FDF members have reported difficulties clearing goods through UK ports because of a growing challenge in obtaining original copies of required paperwork and certification. This covers a range of paperwork, including essential bills of lading, sanitary and phytosanitary (SPS) certificates, origin certificates, catch certificates and other required transport documents. This paperwork is failing to arrive in good time from some countries because of the closure of issuing bodies, banks and chambers of commerce, restrictions on movements and the greatly reduced capacity in air freight with commercial flights grounded.

 

  1. Defra recently made the welcome move of issuing guidance to Port Health Authorities (PHAs) instructing them to accept electronic copies of some key paperwork. However, feedback from businesses indicates that the ports are implementing this guidance via inconsistent and in some cases unhelpful approaches. Businesses are being asked to print, sign, stamp and scan paperwork and submit this in a range of formats depending on the port. This is not always feasible with staff working from home without access to required equipment.

 

  1. Similarly, importers must present an original bill of landing to secure the release of goods from shipping companies. If this paperwork fails to reach the UK before the goods arrive, consignments will be held in port and charged substantial daily fees. As things stand, there remains no workable alternative for most importers with banks typically unwilling to sign letters of indemnity that could allow the release of goods without a bill of landing. While vital to guard against the risk of fraud in ports, these key trade processes can and should be updated to allow the use of a secure digital alternative to facilitate trade.

 

  1. Our food and drink supply chains have remained robust in response to the crisis. Businesses have largely managed to ensure continued access to key ingredients and raw materials and where issues have occurred they have tended to be isolated problems. While there have been delays at borders for goods arriving from the EU, this has improved following the EU’s Green Lanes communication. More serious issues have tended to occur in non-EU countries where businesses have faced issues moving goods because of lockdown measures, particularly ingredients from China and India. However, while these have caused disruption and concerns for businesses, this has so far not had serious impacts on the supply of goods to consumers and won’t unless the markets remain locked down. We are tracking trade measures introduced around the world on behalf of our members and have seen more actions introduced that facilitate trade in food and drink than protectionist measures impeding the flow of goods.

 

Access to finance

  1. The UK Government’s package of financial interventions was an essential move to ensure short term access to working capital for the nation’s food and drink supply. However, the ability of food and drink manufacturers to quickly access these funds presents real concerns and threatens the viability of some businesses. Although UK food and drink companies have demonstrated extraordinary resilience, it has not been an even picture across our sector. While demand for some manufacturers’ products –and subsequent output – has increased greatly, other businesses – particularly those whose sales were principally to hotels, restaurants and catering – have seen their sales evaporate.

 

  1. FDF welcomed the decision this week to extend the appointment of Christine Tacon as Groceries Code Adjudicator having seen worrying suggestions that unfair business practices around delisting suppliers should be allowed as part of the COVID-19 response. For example, according to an survey conducted by The Grocer at the end of March, as retailers dealt with the initial stockpiling crisis, 37% of SMEs reported falling retail sales, with a further 15% having been contacted by supermarket stockists to advise of temporarily delistings. Companies have also reported cancellation of promotions for stock which has been produced but retailers are still charging small distributors ‘clearance fees’ for unused promotion stock.

 

  1. Small and medium-sized firms (SMEs) make up 97 per cent of the UK’s food and drink manufacturing industry and are facing particular issues in accessing money through the Coronavirus Business Interruption Loan Scheme (CBILS). The Bounce Back Loans scheme is a useful step towards making funds more easily accessible for very small businesses. However, for larger SMEs, the application process for CBILS remains onerous and some banks are taking a position that food and drink is not a priority as it is viewed as remaining open for business. Some smaller companies have been badly impacted and even lost listings as retailers consolidate ranges and other speciality stores have closed.

 

  1. The criteria for successful applicants blocks many challenger brands that seek funding while limiting Government’s guarantee to 80 per cent of loans reduces the willingness of banks to lend. We have concerns that these bank decisions could threaten the economic recovery, where exports will play a key role. We understand that some banks are reducing the size of loan offers according to the share of business turnover that comes from food and drink exports.

 

  1. For larger businesses, the Government’s decision to plug significant gaps by offering loans for all businesses with a turnover of more than £45 million has helped. However, eligibility requirements for the COVID-19 Corporate Financing Facility (CCFF) remain too restrictive. This will limit access to larger multinationals deemed to be lower risk because of their geographic and portfolio diversification. While the scheme will be helpful for these businesses, in practice many will already be in a sufficiently strong position to obtain funding from lending banks.

Trade credit insurance

  1. The FDF’s latest member survey shows that more than a fifth of UK food and drink businesses have already seen trade credit insurance reduced or removed and this is getting worse every day. This threatens both the short-term viability of many businesses and the long-term ability of our economy to recover to a place of strength. When current restrictions are lifted and restaurants and the food service sector begin to reopen, the situation could become critical. We have heard that large manufacturers are already being warned by insurers of reduced or withdrawn cover for their sales to cash-rich high street restaurant chains when they reopen.

 

  1. Trade credit insurance gives companies the confidence to trade but because of the highly unusual current market conditions, providers are withdrawing trade credit insurance. We have verified reports of insurers writing to customers on a ‘personal’ or ‘confidential’ basis providing lists of companies about which they have doubts, either to seek further information as to their viability, to warn that limits applying to those companies could be reduced or in some cases threatening to withdraw cover altogether. Most immediately, this affects SME suppliers that make up 97 per cent of our industry. However, large and successful food and drink businesses also face the same treatment.

 

  1. The appearance of a company on an insurer ‘blacklist’ will cause others to lose confidence in it, effectively resulting in a self-fulfilling set of circumstances. The blacklisting of customers by insurers is already hampering efforts throughout the supply chain to find new routes to market for surplus products or to find partners to repurpose or repack stock.

 

  1. The FDF has recently written to the Secretaries of State in BEIS and Defra urging Government to take action as we have seen in France and Germany, by putting in place a guarantee scheme to stabilise the trade credit insurance market. Government underwriting of this market would provide comfort both to insurers and to their customers that otherwise viable businesses will not be allowed to fail and would go a long way to restoring confidence in the market, helping to avert the problem at source.

FDF Hidden Heroes Campaign

  1. FDF has spearheaded industry efforts to identify and celebrate the highly valuable contribution being made by workers throughout the sector. We are primarily highlighting those workers across the food and drink supply chain who are keeping the nation fed through FDF’s #HiddenHeroes campaign on Twitter.

 

  1. We know that the public remarks by the Defra Secretary of State, Scotland’s First Minister, members of the Royal family and others to acknowledge the efforts and sacrifices made by key workers in food and drink made a difference to our workforce, particularly in the early days. We would like political and public figures to continue to celebrate the hidden heroes of our industry.


Annex 1                             The UK Food and Drink Manufacturing Industry

 

The Food and Drink Federation (FDF) is the voice of the UK food and drink manufacturing industry, the largest manufacturing sector in the country. Our industry has a turnover of more than £105billion, which is almost 20 per cent of total UK manufacturing, and Gross Value Added (GVA) of £27.5billion. Food and drink manufacturers directly employ over 430,000 people across every region and nation of the UK. Exports of food and drink make an increasingly important contribution to the economy, exceeding £23billion in 2018, and going to over 220 countries worldwide. The UK’s 7,400 food and drink manufacturers sit at the heart of a food and drink supply chain which is worth more than £120billion to the economy and employs 4.3 million people.

 

The following Associations actively work with the Food and Drink Federation:

 

ABIM              Association of Bakery Ingredient Manufacturers

BCA              British Coffee Association

BCUK              Breakfast Cereals UK

BOBMA              British Oats and Barley Millers Association

BSIA              British Starch Industry Association

BSNA              British Specialist Nutrition Association

CIMA              Cereal Ingredient Manufacturers’ Association

EMMA              European Malt Product Manufacturers’ Association

FCPPA              Frozen and Chilled Potato Processors Association

GFIA              Gluten Free Industry Association

PPA              Potato Processors Association

SA              Salt Association

SNACMA              Snack, Nut and Crisp Manufacturers’ Association

SSA              Seasoning and Spice Association

UKAMBY              UK Association of Manufacturers of Bakers’ Yeast

UKTIA              United Kingdom Tea & Infusions Association Ltd

 

FDF also delivers specialist sector groups for members:

 

Biscuit, Cake, Chocolate and Confectionery Group (BCCC)

Frozen Food Group

Ice Cream Committee

Meat Group

Organic Group

Seafood Industry Alliance

Food and Drink Federation              Page 8