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Shelf preservation society: major challenges await UK supply chains this year

Shelf preservation society: major challenges await UK supply chains this year
7 min read

If Britain’s supermarkets are to remain well-stocked, the government must address the long-term challenges facing the supply chain. From labour shortages to Brexit bureaucracy, there are gaps in the system that puts food on the table, writes Adam Payne.

The crisis facing supply chains late last year was so serious that Boris Johnson brought in Sir David Lewis, a former CEO of Tesco, to be his emergency tsar, with a mission to bang heads together and get food back on supermarket shelves.

The food and drink industry had been badly hit. Headlines appeared almost daily about household names such as McDonald’s, Greggs, and Nando’s, as well as the major supermarkets, running out of items.

The disruption, which led to a flood of images on social media of empty shelves, was blamed primarily on chronic labour shortages: a combination of Covid and stricter immigration rules brought in after Brexit exacerbating a dearth of lorry drivers in the UK, on top of insufficient numbers of pickers, butchers, warehouse workers, and other staff in the supply chain.

Lewis, whose contract has now expired, got to work in early October – and in earnest.

He worked with the industry to tackle short-term problems so that food and drink was able to reach supermarkets and hospitality businesses, while helping the government better prepare supply chains for crises in the future.

More than 100 businesses spanning 14 sectors shared information with Lewis, which was then relayed to the Prime Minister and used to inform policy.

Johnson also asked Stephen Barclay, as Chancellor of the Duchy of Lancaster his ministerial trouble-shooter-in-chief, to work alongside the former Tesco boss to seek out quick solutions.

Whitehall figures say their actions successfully abated disruption and left the government better equipped to help supply chains be more resilient going forward.

Speaking to The House, Barclay says the government took 32 actions to keep supply chains moving and shore them up in the long term, including putting £34m towards HGV “skills bootcamps” which are expected to train more than 11,000 lorry drivers. “There are still challenges ahead – particularly from the impact of Omicron on global trade – but we will ensure that our logistics sector has all the support it needs,” he says.

A senior official adds the government is now “better prepared for future flare ups”, and in “a better situation in terms of understanding this issue better and having the info we need”.

But the issues facing food and drink supply chains haven’t disappeared – far from it.

Take labour shortages: while they may no longer top the news bulletins, they remain a huge problem for the food and drink industry. Towards the end of 2021, the Food & Drink Federation (FDF) estimated the industry was around half a million short of the workers it needed.

if you go into a supermarket now, it’s like going back to the 1990s

The meat sector has been among the most adversely impacted, with shortfalls in staff, in the past often recruited from EU countries, causing slowdowns in production.

Nick Allen, CEO of the British Meat Processors Association, tells The House: “The problems haven’t gone away. We’re still very short of workers and we’re still very concerned about where they are going to come from.”

Allen adds there are currently more job vacancies than people ready to fill them, meaning firms “are pinching one another’s staff”. This is forcing under-staffed processors to prioritise high-volume, simpler cuts, Allen says, leading to the sacrifice of more up-market products requiring greater time and work, like meat with fat removed or with greater emphasis on presentation, resulting in diminished consumer choice.

“Colleagues are coping by reducing product lines,” he says. “Ultimately, that means there is less choice and if you go into a supermarket now, it’s like going back to the 1990s.”

In the autumn, ministers gave in to industry pressure and set up short-term visa schemes for overseas butchers and poultry workers, designed to plug gaps in the labour force in time for the busy Christmas period.

The Home Office refused to disclose how many visas had been issued through the schemes, with the department telling The House the figures would be published in the next quarterly immigration statistics report, due later this month. However, Allen says that, so far, the impact on his sector has been “marginal”.

Then, naturally, there is the B-word.

This year, having delayed several times, the government is finally introducing checks on goods arriving from the European Union – a new world of bureaucracy for importers necessitated by leaving the bloc’s single market and customs union. Food and drink businesses will be particularly impacted by the new friction. The UK gets around two-thirds of its fruit and vegetables from the continent, for example, along with about 60 per cent of its cheese.

Ministers decided to bring in this plethora of new paperwork in stages, with the most onerous checks coming later in the year.

The government reached the end of last month feeling cautiously optimistic about how traders had adapted to the first tranche of checks introduced on 1 January.

A senior Defra source said warnings of major disruption to food and drink supply chains had not materalised, and that systems designed by government in preparation for the consequences of Brexit had stood up to the test.

FDF data, shared exclusively with The House, found low levels of disruption last month, with a very small decrease (one per cent) in food and drink brought in from EU countries by businesses which responded to the survey.

There’s now an ever-present risk of disruption in which certain products don’t get through

However, ministers shouldn’t get too carried away with those early signs, according to industry leaders, who say many food and drink companies simply didn’t bother attempting to import at the start of 2022.

“What we saw in the first few weeks of the year was businesses deciding to stop moving goods while they wait and see how the new systems stand up,” explains the FDF’s Dominic Goudie. “We’re waiting for the first weeks of February, when we expect trade volumes to pick up, to see how smaller, less-prepared food and drink businesses cope”.

Shane Brennan, chief executive of the Cold Chain Federation, says the UK’s significantly looser trading links with the EU will have “massive structural implications” for the food and drink industry, which ultimately will mean less choice for shoppers in the long term.

“Supermarkets are simplifying their ranges,” he says.

“Fundamentally, you can no longer treat suppliers in northern France like you do a supplier in the UK, so inevitably there’ll be less trade with that source. This, in turn, means there’ll be a smaller range of products.”

For some businesses, according to Goudie, this new reality will make it too complex and expensive to continue importing “high-risk” food from the EU like meat, fish, eggs, and dairy goods, forcing them to give up on that trade.

He adds that random gaps will continue to appear on supermarket shelves because the challenges facing the supply chain will be long-lasting: “There’s now an ever-present risk of disruption in which certain products don’t get through.”

A senior government official rejects this claim, telling The House: “Some items might have been missing from shelves in the run-up to Christmas, but industry has invested massively in their supply chains and will see a way through any short-term challenges.”

Nick Thomas-Symonds, the shadow secretary of state for international trade, says a Labour government would ease the strain on food and drink businesses by forming closer ties with the bloc: “A Labour government would make Brexit work by negotiating a bespoke UK-EU veterinary agreement to cut red tape for our food and agricultural industries.”

 

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