Written Evidence submitted by Nestlé UK & Ireland (LS0047)
Nestlé UK&I welcomes the opportunity to respond to the Environment, Food and Rural Affairs Select Committee’s inquiry into labour shortages in the food and farming sector. We are the world’s largest food and beverage company, with more than 2,000 brands, ranging from global icons to local favourites, and are present in 191 countries around the world.
Within the UK and Ireland we employ over 8800 people across our network of offices, factories and distribution centres.
This is an important issue that is impacting all parts of the food supply chain, and we are pleased that the EFRA Committee has chosen to examine it further. The food sector has an important role to play in helping to move towards a higher skilled, higher wage economy. However there needs to be greater recognition that this will be a gradual shift and will not happen overnight. Meanwhile there are critical roles in the food supply chain that need to be maintained.
The biggest issue currently facing the food industry is driver availability. From a procurement perspective, the primary impact on our operations is a lack of driver availability in our hauliers. This is routinely resulting in stoppages, particularly when there is a need to bring materials forward, as suppliers struggle to find haulage at short notice. While we have been able to meet demand, we have had to work to match driver volume to the resources available and prioritise customer deliveries. As a result, the elasticity in our supply has evaporated, meaning we have no capacity to accommodate late requests for transport resources which compromises our flexibility.
Within co-packers and warehouses we are also seeing a labour shortage for low skilled jobs. There has been a decline in availability in some geographies, such as the Midlands, where there are high levels of e-commerce activity which has grown significantly in recent years. This has resulted in competition for staff, which has driven significant wage inflation, in some areas as high as 20%.
While the factors around current driver shortage are well reported – a combination of an ageing single gender workforce with the impact of losing around 15% of the workforce due to COVID-19, and freedom of movement changes post-Brexit – in recent years we have also seen increased need for warehouse and co-packing staff. This is driven by the massive rise in demand driven by the growth of e-commerce which is, by its nature, labour intensive.
The expectation within industry is that the driver shortage is expected to continue for two to five years while warehouse shortages are more seasonal. As such we could expect to face these challenges at regular periods throughout the next few years alongside the growth of automation.
The food supply chain currently faces a range of challenges, some of which are related to the labour shortage issues outlined above such as availability and price of materials. Increased demand requires additional flexibility and capacity from suppliers to meet extra demand, which has extended lead times for raw and packaging materials. This limits our ability to adapt in order to meet demand, or implement short-term planning changes, and we can lose capacity as a result.
More broadly, we have seen recent challenges around the supply of CO2 used in our products and packaging and increases in the price of key global commodities including coffee.
We are currently unable to comment on the impact this will have as it will be dependent on several factors, including the smooth operation of border control points from 1st July. However, we remain concerned with the lack of digital health certificates, meaning we are reliant on a paper-based system while EU producers create these documents which will extend lead times.
We welcome and appreciate the Government’s interventions this year on CO2 supply and COVID-19 testing, as well as the regular communication through the FRIF to understand what can and will be done to alleviate the issues being faced across the industry.
The wider measures undertaken by the Government to alleviate driver pressures, such as the extension of driver hours, has to date had a very limited impact. We are unlikely to be able to make use of the temporary visas for 4,700 EU driver due to the limitations and restrictions imposed. While increased driver testing capacity will have a positive impact in the longer term, it will not alleviate the issues the supply chain is facing in the short term.
Support to increase the availability of drivers is our key ask, particularly as this is forecast to be a challenge we face for several years. One specific measure the Government could take to increase driver availability is removing the Driver Certificate of Professional Competence (CPC). This mandatory requirement creates a barrier to drivers returning to the industry, and removing it would encourage more retired drivers to come back into the industry. Mandating high-quality driver facilities as part of large infrastructure projects, such as logistics parks, would improve working conditions for drivers.
As the recent situation at Felixstowe demonstrates, there is a clear need for additional port capacity for containerised freight as port capacity also impacts on our distribution capabilities.