The UK food and drink industry is facing a period of uncertainty and chaos following the vote to leave the EU as more than a quarter of its workforce come from eastern Europe, according to the sector’s trade body.
Ian Wright, director general of the Food and Drink Federation, which represents 6,620 businesses, said 130,000 of the industry’s 450,000 staff came from eastern Europe.
The body’s members range from big brands such as Britvic, McVitie’s and Mr Kipling to small-scale producers such as the oatcake maker Maclean’s Highland Bakery.
“Inevitably they are very frightened and unsure of what they should do,” Wright said. “We may see many decide to go home. The reassurance we have heard from the leaders of the Leave campaign at the moment does not amount to much,” he told attendees at the annual conference of the Grocery Code Adjudicator, the industry watchdog.
Wright said the industry faced chaos because of the outcome of the referendum vote which he personally thought was “catastrophic and inexplicable”. The likely devaluation of the pound against the euro could drive up the cost of ingredients sourced from abroad while the “entirety of regulation on food labelling and safety is about to disappear” because it was set in the EU.
He said prices for shoppers were likely to increase as a result of the fall of the value in the pound, and businesses would be pausing investment because of the difficulty in writing a business or marketing plan in such a volatile environment.
Before last week’s referendum, 71% of the FDF’s members wanted the UK to remain in the EU and just 12% backed leaving. Wright said most international businesses would now freeze their investment decisions and he knew of three major businesses – though none were in the food and drink sector – which were already planning to inform staff of their long-term strategy to exit the UK.
Some eastern European workers, whose rights here would not be guaranteed on Brexit, were likely to be planning to leave the UK because they would want more certainty about their future, he added.
“We now face a period of complete chaos. The country is leaderless on both sides. The remain camp has no plan B and those who voted leave have no plan at all. We face months of profound uncertainty.” He said the economy was about to go on a “big dipper” ride.
Wright’s warning comes after the National Farmers Union also warned of price rises following the Leave vote.
Meurig Raymond, president of the NFU, said the EU referendum result had been a “political car crash” and that UK farmers who receive up to £3bn in subsidies from the EU each year were headed into “uncharted waters”.
One retail analyst, Bruno Monteyne at Bernstein Research, suggested last week that the cost of food for retailers could rise by as much as 2% or 3%, compared to deflation of about 2% at present if the pound devalues against the euro.
While retailers are likely to absorb some of that rise, because economic uncertainty will mean shoppers are being very cautious, some inflation will hit the shop floor. A high proportion of fresh produce sold in July, August and September – peak harvest time – tends to be grown in the UK but that diminishes into the autumn when prices are likely to rise, particularly on fresh produce.
According to the NFU, only 15% of the fresh fruit sold in the UK and 55% of the vegetables are grown here. Most of the rest comes from the EU. Pork is another foodstuff likely to be heavily affected, as nearly 40% sold in the UK comes from overseas.
