Food price rises are inevitable as sanctions bite

The author is the Chief Executive Officer of the Food and Drink Federation

The world is united against Russia’s brutal attack on Ukraine. The UK government’s decisive action on sanctions is backed by the food and beverage industry, as we watch a growing humanitarian tragedy unfold before our very eyes. We agree that a price should be imposed on President Vladimir Putin and his government for their actions. Russia cannot invade its neighbor and remain part of the global economy and trading system.

But our members are well aware of the implication that UK businesses and shoppers will suffer from flows from sanctions, trade restrictions and supply chain disruptions. This will translate into a rise in food prices and, possibly, a temporary decrease.

The situation is more dire as the pandemic, during which the global supply chain was struggling to meet unpredictable demand, pushed up prices. With Ukraine and Russia – for different reasons – no longer exporting goods to most countries, global shortages loom that exacerbate current inflation.

The UK is not dependent on food supplies from Ukraine and Russia, but we are affected by price increases due to shortages in world markets. This month, global wheat prices rose more than 80 percent from a year ago. Sunflower oil – 80 percent of it is produced by Ukraine and Russia – is becoming increasingly unavailable, raising the cost of alternatives. Other products, such as white fish and wood pulp used in packaging and labels, are becoming scarce as supplies from Russia and Ukraine run out.

Food and beverage manufacturers are in a bind. They may not see a reduction in the huge growth of input costs – materials, raw materials, energy etc. this year. One company told me it expects energy costs to increase by up to 500 percent this year. Businesses are quickly removing additional costs from their processes. But there are limits. Margins are suddenly and severely squeezed, with higher prices inevitable.

There is already a growing livelihood crisis in the UK. Now the rise in food prices will be accompanied by a sharp rise in household bills, fuel and borrowing costs. Incomes are under tremendous pressure, with low-income households being particularly vulnerable.

There is not much the government can do about prices in global markets. But it could reduce food price inflation in the UK and eliminate gaps in the shelves.

We have three suggestions. First, these pressures are unprecedented and there must be a reaction. The supply chain will be highly unpredictable in the coming months. UK and developed administrations should allow industry to use safer, alternative products where ingredients become unavailable, often with little notice – starting with sunflower oil. If we are to keep products flowing freely, manufacturers need to rapidly compromise on alternatives.

Second, the UK’s prized food security and resilience must be tightly guarded. Our producers and producers are in every part of the country – and we want to keep it that way. We need a strong, cross-government mechanism, a National Food Safety Council to work with industry and enable us to respond collectively and rapidly to the impact of supply chain disruptions. Some effects are already evident but others will take longer to understand. We need to respond to the urgent issues of ingredient and energy costs and the long-term impacts of fertilizer, petrochemical and CO2 reductions.

Third, ministers should urgently remove the complexity and cost from upcoming regulations. Businesses need to be able to focus on keeping afloat and feeding shoppers. From new packaging regulations on where food promotions can be placed in stores, we urge ministers to pause, reflect and consider whether the regulation is fit for purpose – and whether there is no longer an opportunity to pass on the additional costs to consumers. there is time.

The government has more power over how the crisis in Ukraine affects the UK than it thinks. He should use this power wisely.

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