UK Growers have warned that the market will need to fund additional costs resulting from increases in the national living wage and the rise in employers National Insurance contributions announced in the Budget.
In a recent statement, British Growers pointed out that while the industry has done a remarkable job in managing production costs and improving efficiency which has delivered fantastic value for consumers, managing costs and improving efficiency can only go so far in the face of rising production costs.
In 2022 and 2023 growers absorbed significant increases in the cost of production due to rising energy and other input costs. But the increase in employment costs announced in the October budget will push up production costs by further 10 to 12%. As employment costs in fresh produce businesses represents a disproportionately high percentage of overall production costs – for some crops, it can be as much as 60% of the total cost of production – growers are concerned about a disconnect in perceived value.
For example, messaging from the marketplace over the Christmas period and continued price wars suggest that many buyers and retailers fail to understand the material effect of these increased labour costs on the primary production sector despite a recognition that their own internal costs are rising for a similar reason.
Many businesses have already delayed or cancelled investment decisions because of low returns but the organisation warned this lack of investment can only go on for so long. “The expectations on growers are changing all the time with ever higher requirements to meet consumer demands,” said the statement. “Meeting these demands requires investment which for too long has been on hold due to low returns. The market has to recognise that all parts of the supply chain need to see a return on investment to ensure the UK has a viable and well invested fresh produce industry for the future.”