Turning a corner

It’s good to read that food and drink prices have started to show encouraging signs of peaking in the UK.

According to the Food and Drink Federation, food and drink prices have dropped by point one of a percentage point, from 16.9% in December to 16.8% in January.

Not an enormous change and businesses are not out of the storm yet, but as the Federation says it’s a promising sign of peaking.

Delving deeper, the analysis indicates pressure is easing across the board. For example, Dr Liliana Danila, lead economist at the Federation writes that food and drink manufacturers faced higher prices for their ingredients, with UK-sourced ingredients being 18.0% more expensive (up from 17.7% in December) and imported ingredients 25.8% costlier (down from 26.9% in December). Goods leaving the manufacturers’ facilities — output gate prices, saw inflation at 17.0%, unchanged from December.

This is positive but such changes take time to work through the chain. It’s estimated that retail food inflation will persist throughout 2023, and this year looks like another difficult one. Besides ongoing cost pressures, the industry is facing a consumer unsure of their financial position.

Speaking to a farmer on the weekend, who is struggling with how the cost of living crisis is squeezing his household, it is only too real how he and others are cutting their spending.

Insolvencies continued to rise in November, suggesting December figures will show insolvencies in 2022 in the industry were double the rate of 2019.

The food and drink industry accounted for 6% of administrations in 2022 – the sixth highest sector in the UK – according to analysis by full-service law firm Shakespeare Martineau.

A total of 1,340 businesses – 87 of which came from the food and drink industry, which included several breweries and restaurant chains – filed for administration last year, marking a 56% increase compared to 2021.

There are calls for action to support investment, which has taken a backward step given ongoing challenges. I’m certain there’s better news forthcoming. Currently, though, we’re looking for the upcoming budget to focus on the twin objectives of triggering higher growth and sharply improving efficiency of public expenditure and government flagship programmes to benefit the common man.

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