Written evidence submitted by Scotland Food & Drink (LS0019)

Submission to the Environment, Food and Rural Affairs Committee: Labour shortages in the food and farming sector

Introduction

Scotland Food & Drink is the industry leadership group focussed on the strategic development of the nation’s farming, fishing, food and drink sector. We are industry-led, but founded upon a partnership between the public and private sector in Scotland.  Collectively, we develop and deliver the strategy to grow the value and reputation of the Scottish food and drink industry. 

We are a membership body and have 450 companies and organisations as members, over 300 of whom are food and drink manufacturers. Our manufacturing members range from small, new start businesses to long-established, multi-nationals.

As an organisation, we co-ordinate the “Scotland Food & Drink Partnership” which comprises the main industry trade bodies in Scotland alongside representatives from the Scottish Government and its main agencies. Collectively, we have developed Ambition 2030, the joint strategy to double the value of Scotland’s farming, fishing, food and drink sector to £30 billion by 2030.

You can find more information on Ambition 2030 here: https://foodanddrink.scot/resources/publications/ambition-2030-industry-strategy-for-growth/

Over recent months, we have also launched a joint industry and Scottish Government programme to recover from the global pandemic and to help the industry navigate Brexit.  You can find more detail on that plan here:

https://foodanddrink.scot/recovery-plan/

Inquiry detail

We have been working on a daily basis with Scottish and UK Governments, and our industry partners, to tackle the hugely challenging situation facing food and drink businesses through the shortage of labour.  This is one of the most acute challenges facing the industry in a generation and the need for immediate solutions is now critical. This challenge, which is compounded by a range of wider pressures, is now so acute that the future viability of many businesses could be at risk, as well as the continuity of the United Kingdom’s food supply.

Our answers to this call for evidence reflects our experience and proposes critical steps that must be taken now to safeguard the future of the one of the most important sectors in the Scottish economy.

1. What is the extent and nature of labour shortages currently being experienced?

Labour shortages are being felt across the entire food and drink supply chain but are particularly acute in red meat, dairy, seafood, and bakery manufacturing and processing, and across our abattoir sector. These sectors are very reliant on EU and other international labour:

• Overall, 15% of the workforce across food and drink manufacturing are EU nationals – this compares with around 8% across all sectors 
• In rural areas, and in some sectors, this reliance is critical: 58% of the workforce in seafood processing across the North-East of Scotland is EU nationals
• The industry is one of the most reliant on seasonal labour, with 75% of businesses seeking additional labour throughout the year

There’s approx. 45,000 employed across food and drink manufacturing in Scotland at any point but we typically we need an extra 15% seasonal labour each year to support the peak trading period of October to December. However, the industry is currently already running at reduced staffing levels of around 15%, with the prospect of securing additional seasonal labour almost non-existent.  Coupled with this, accessing domestic labour continues to be challenging. Unemployment is low (4%) and even lower in rural areas. Recent experience shows that despite industry’s best efforts to recruit and retain domestic labour it’s not a sustainable solution, particularly in the short term.

2.                              What are the factors driving labour shortages in the food supply chain?

There are range of factors at play contributing to this challenge, but the majority of which related to the United Kingdom’s departure from the European Union:

• Many EU migrants returned home as the UK prepared to leave the European Union due to the uncertainty around future settlement and movement;
• It is much more difficult for willing workers across the EU to now work in the UK due to the more stringent immigration rules; and
• An ultra-competitive domestic labour market is providing more choice for the workforce seeking more lucrative opportunities

These challenges have been compounded by the ongoing implications of the Covid pandemic resulting in increased levels of staff absence (through Covid) and the associated compliance with the self-isolation requirements.

3. What is the outlook for the labour shortage situation in the coming months and years?

The short-term outlook is bleak and extremely concerning. The industry has essentially, overnight, had the tap turned off of a pool of skilled, hard-working and reliable individuals who were critical to the success of our industry.  Business leaders are united in their view that the shortage of labour is the single biggest challenge they face. They are seeking to recover quickly from the adverse impact of the pandemic and there are market opportunities to be released – but the shortage of labour means they are unable to realise these recovery and growth opportunities and, worse still, are at risk of being able to fulfil orders with existing customers, potentially damaging their reputation and jeopardising future business.

Clearly industry recognises that we must and can do more to attract and retain more domestic labour. The industry is committed to do so in Scotland, building on the good work that’s already being done across the industry and by businesses themselves.  However, this will take time and in the short-term – over the next 5 years – the Government must support this transition with a mix of short-term and longer-term interventions and policy solutions.  Failure to do so will mean the viability of many businesses is at risk, the scope for growing the local and national economy will reduce, and the prospect of less choice and higher food prices for consumers will become increasingly likely.

4.      What other issues are affecting the food supply chain?

The labour shortage continues to be the most critical issue facing the industry but there are a range of other pressures that, combined, is creating a perfect storm of challenges.  These include:

• Loss of markets domestically and internationally for many businesses as a direct result of Brexit and the pandemic. Domestically, the closure of the hospitality sector was crippling for many businesses, whilst internationally Brexit meant significant challenges in serving our largest export market

• Relentless squeeze on producer and manufacturers’ margins, due to the competitive and, at times, ruthless nature of the UK retail market, and the competition from other countries in international markets, all vying for the same market opportunities

• Rising costs on an unprecedented level – this includes 20% increases for raw materials, ingredients, packaging; wage inflation; and soring energy costs. This includes emerging problems with CO2 production in terms of continuity of supply but, more concern, the prospect of price increases of up to 3-times more per tonne

• Logistical challenges – the pandemic and Brexit has caused significant disruption to the food and drink supply chain across the world and the consequence is a shortage of materials (packaging, machinery), shipping containers, and the well-documented haulage availability

5. What impact will the timetable for introducing physical checks at the border on food and live animal imports from the EU have on current issues being experienced by the UK food supply chain?

The introduction of additional checks is likely to create further disruption to the food and drink supply chain.  However, this needs to be balanced with the need to create a level playing field for UK producers exporting their goods to EU markets who are currently at a competitive disadvantage. 

6. What measure has the Government taken to alleviate the problems being faced by the food supply chain this year? To what extent have they been successful?

The UK Government response to range of challenges being faced by the supply chain has been sub-optimal. Earlier this year we sought their support in finding solutions to the friction and disruption caused by leaving the EU and adapting to the new trading rules – rules that were only agreed a few days prior to them coming into effect on 1 January, giving no time for businesses to properly prepare. Whilst the Government did seek to introduce some funding support for the seafood sector it was reluctant to support other sectors, or develop any proper solutions to the fundamental issues affecting traders. 

More recently, the UK Government response to the labour crisis has been woeful. It has spent months denying a problem existed despite numerous and sustained warnings from industry across the United Kingdom, and the more recent intervention (temporary visas for HGV drivers and the poultry sector) is a mere sticking plaster on a much more widespread problem. Moreover, we have been unable to get any clarity on the logic used by Ministers to only grant visas for the poultry sector – clearly the poultry sector is critically important for the traditional festive trade but so are other sectors such as red meat and seafood, both of which face similar challenges. Finally, the delay in bringing forward these solutions combined with the very limited criteria governing the rules may be too little late.

7. Does the Government need to take further steps to support the food supply chain?

Yes – one solution is to urgently extend and expand the scope of the temporary visas to meet the demand of the wider food and drink industry. In doing so, it must recognise that the industry needs a ‘bridge’ – essentially a transition – over a 5-year period to adjust to the structural real-world changes that leaving the EU has created. The Government will have different options for how they achieve through a more flexible controlled immigration policy – but it must work more closely with industry to develop the options and solutions.

ENDS

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