Scotland Food & Drink writes to UK Government on cost crisis

Cost Crisis: Interventions Needed to Support Food and Drink Producers

Dear Secretary of State

Congratulations on your recent appointment to Secretary of State for Business, Energy and Industrial Strategy. We wish you well in your role.

We were deeply saddened by the recent passing of Her Majesty Queen Elizabeth II and understand entirely that your department is focusing on essential matters only in the coming days. One of those essential matters, the cost crisis facing businesses, is the reason for writing to you today.

Scotland Food & Drink is the leadership body for the food and drink sector in Scotland, working in partnership with other trade bodies and the public sector to grow the value and reputation of the industry. We are proud to have over 400 members contributing to our organisation, working with us to ensure Scotland continues to be internationally recognised as a land of amazing food and drink.

We welcomed the Prime Minister’s speech to Parliament, and the subsequent “Energy bills support factsheet”, both of 8th September, confirming that businesses across the UK will receive comparable support to that being offered to households.

We await the detail with interest and note that business support is due to last for six months with a three-month review to determine which sectors will continue to receive support beyond then.

Our first request is that, during your review, you take into account the uniquely perilous situation facing businesses along the food and drink supply chain, including processors and manufacturers. Energy price support for these businesses must remain in place because:

1. The cost of production crisis is worse for food and drink businesses due to our reliance on inputs that have all risen in price including ingredients, packaging, transport, logistics and energy.
2. The compounding element of being unable to fully absorb or pass on these costs. Incredibly tight margins in the UK’s highly competitive food and drink market preclude the former, whilst the social imperative to keep consumer prices as low as possible precludes the latter.
   
   

We need to avoid rising food prices to protect consumers during the continuing cost-of-living crisis. We need to also avoid job losses and we especially want to avoid business closure. Without continued support for cost prices, we fear these are inevitable.

We wrote last week to the Prime Minister asking for further interventions in the following areas, some of which fall within your purview. We further request that, where they fall within your direct responsibility, you consider these further, and for those areas outwith your responsibility, your support to your Cabinet colleagues would be appreciated:

1. Reintroduce the Fuel Rebate - provide immediate relief and allow reduced-duty “red diesel” to be used in the food and drink supply chain, working with us to plan a transition to an economically viable, greener alternative.
2. Pause Covid-related Loans: the support provided by Government to business during Covid helped many remain viable. Businesses are starting to re-pay those Bounce Back Loans but we ask that payments are paused to aid cashflow.
3. Access to Labour: Access to labour remains one of the most pressing challenges. It is almost impossible to meet demands through domestic labour, which hampers productivity and growth. We welcome the UK Government’s approach to seasonal agriculture workers and urge you to extend and expand this scheme (or find an alternative mechanism) to ensure more sectors across the industry can access the labour we desperately need.
4. Safeguarding CO2: Due to the spiralling energy costs we fear that access to CO2 provision could be in jeopardy and urge the Government to intervene once again to safeguard supply and help manage the cost. As you know, CO2 is a critical input for the industry, and it is imperative that we have continuity of supply as we enter the vital Christmas trading period.

We believe that we can alleviate the short-term cost challenges by working together and our final request is that you meet with us and the key trade bodies across the Scottish industry to discuss these issues in more detail.

We have written in similar terms to the Scottish Government urging it to bring forward interventions in devolved areas of policy. It is clear to us, our members, and the wider industry, that continued leadership and action across the UK Government holds the key to unlocking a large part of this challenge and we are committed to working constructively with you to achieve this.

I look forward to hearing from you.

John Davidson
Interim Chief Executive