Confidence among suppliers has reached a “record low” in the wake of the coronavirus pandemic, according to a new survey released today.
The FDF poll of its members, in conjunction with Santander, shows a net confidence score of –65% at the end of Q2 this year, compared with –13% at the start of 2018 when the survey began.
The toll taken by the pandemic has resulted in more than half of companies facing problems with cashflow, with 90% suffering falls in sales from the embattled out-of-home sector in Q2 as it “nosedived” due to lockdown.
Almost 60% of companies reported fewer product launches and 41% reported a fall in the number of SKUs in production in Q2 – despite 51% recording higher domestic sales.
However, the FDF said the biggest challenge was still to come, with suppliers facing huge costs as they braced for a repeat of the stockpiling crisis experienced by the industry last year, due to the prospect of a no-deal Brexit.
With hopes of a trade deal with the EU on a knife-edge, the survey showed almost 50% of companies had already reported increased costs of stockpiling in Q2 amid fresh concerns over food shortages in the new year.
The re-emergence of stockpiling comes amid mounting concern cover import costs. More than 40% of companies reported ingredient costs had increased in Q2, and over one third said they had risen by 5% or more, as supply chains had been hit by the impact of coronavirus.
“The findings of this poll present a vivid picture of the damage the food sector has sustained as a result of the coronavirus pandemic,” said FDF COO Tim Rycroft.
“These are stark numbers and it’s quite clear to see there has been a huge dip in business confidence in Q2.
“What is more positive is that this is an opportunity for the government to help businesses by providing help to boost exports and take advantage of the headroom for growth in sales to our export markets.”
FDF CEO Ian Wright said he believed the threat of disruption caused by Brexit was an even greater challenge than Covid-19. He warned the UK faced a repeat of the stockpiling scramble that occurred when the UK faced the threat of no-deal Brexit three times in 2019.
“Our greatest challenges lie in maintaining uninterrupted supply of imported food and ingredients to all parts of the UK,” said Wright in his introduction to the report.
“Our successes in response to the Covid-19 pandemic – which, perhaps surprisingly, did not materially impact on UK food imports – in no way guarantees a smooth passage following 31 December 2020.
He told The Grocer: “This report sees stockpiling raise its head again but fairly quickly it’s going to become a commonplace issue.
“It is extremely concerning. There is, as with all the rhetoric, an enormous assumption that because we got through Covid using last-time plans for no-deal Brexit, we’ll get through it this time in the same way.
“Maybe ministers think they can, if necessary, pull a fast one and link it all into Covid and the general crisis, but while they may say that, it just won’t be true.
“There’s a lot of technical and practical difficulties to get through. Stockpiling is just the one they’ve got to already, but all the others – customs, animal plant checks, all the practical difficulties – will start arriving on people’s desks now.”
Despite Covid and the risks from Brexit, the report highlights increased export growth throughout the remainder of the year as a key opportunity for the government.
With UK food and drink exports recognised globally for their quality, provenance and heritage, and worth more than £23bn annually, the report highlights export opportunities in three key regions: the UAE and the Gulf, China, and the US and Canada.