Food and drink producers took a financial hit of around £1.4bn in the year to July 2023, due to the chronic labour shortages that have affected the industry’s output, the FDF’s State of the Industry report showed.
Labour shortages cost the sector £192m in the second quarter of the year alone.
Even though the industry’s vacancy rate – the number of vacancies per 100 employees – eased in Q2 (down to 4.8% from 5.9% the previous quarter), food and drink manufacturers still experienced higher vacancy rates than those in the wider manufacturing sector and the national average, which were 2.9% and 3.3% respectively.
Shortages continued to stop economic growth, the FDF said, and would have “repercussions on business investment and the ability to rebuild margins”.
“Significant labour shortages have cost businesses £1.4bn over the last year, with companies being forced to leave vacancies unfilled and reduce production – all of which contributes to rising wage bills, higher prices and stifles growth, which is vital for a strong economy”, said FDF director for growth Balwinder Dhoot.
“Investment is essential if we are to build a sustainable and resilient food supply chain which supports the economy and feeds the nation. Our members are unable to expand their operations, principally because they haven’t got the staff.”
Over half of manufacturers (57%) reported vacancies of 0%-5%. Mid-sized businesses, which have a turnover of £26m-£500m, felt the brunt of these shortages, with half of them reporting vacancies of up to 10% – almost three times the national average.
Unfilled vacancies continued to affect a wide range of roles and skills, particularly for project engineers, scientists, lab technologists and plant engineering technicians.
Other key roles such as production operatives – including machine operatives, frontline operations and warehouse operatives – also are struggling to attract candidates, businesses said.
The UK manufacturing sector, much like other food & drink industry sectors, has struggled to fill the gaps left by European workers who left Britain after Brexit.
The mass exodus left thousands of open vacancies across logistics, warehousing, and farming, which the government has tried to mitigate by making it easier for workers from outside the EU – particularly south east Asia – to come to the UK for work via fast-track visa schemes like the Seasonal Worker scheme.
Ministers are expected to respond to the Independent Review into Labour Shortages, an industry report that laid out 10 key recommendations for government in order to tackle labour challenges within the food and drink industry, this autumn.
These included the implementation of a comprehensive strategy to enhance sector attractiveness, streamline migrant labour recruitment, invest in domestic workers, and incentivise automation within the sector.
The FDF is urging the government to collaborate closer with the industry and the education sector to tackle skills shortages ahead of its response to the independent review.
“We need government to work with industry to implement all 10 recommendations in the Independent Review into Labour Shortages and to deliver the prime minister’s commitment to grow the economy,” Dhoot said.
Despite the challenging landscape, the FDF survey found business confidence was starting to improve, climbing 18 points in the last period.
This signalled some sector recovery following a period of “volatility and unprecedented supply chain disruption” with Brexit, Covid-19 and the Ukraine war all “disproportionately” impacting food, the report said.