Food prices will increase still further because of soaring energy costs, food manufacturers have warned.
UK producers currently face energy bills that are 10% higher than rivals in Germany and the gap is set to widen to 15% in April 2013 when the government introduces its carbon floor price, designed to penalise energy generators that use coal and gas. It is predicted that the bill will be largely met by industry and consumers in the form of higher charges.
Food & Drink Federation (FDF) head of climate change and energy policy Stephen Reeson said: “We are expecting to see our energy costs rise substantially, mainly as the result of carbon price support and the cost of EU emissions trading allowances.
“We have written to the chancellor urging him to consider the negative impact this will have on the competitiveness of our sector. With continuing pressure from agricultural commodity prices and relatively high labour costs compared to many of our competitors, it is difficult to see how we can avoid some of this being passed on to consumers.
“Such a scenario would not only impact adversely on individuals but undermine our potential to a make a significant contribution to future UK economic growth.”
Reeson said the FDF was working on a series of projects designed to spark an economic recovery, such as the Growth Review, the Department for Environment, Food and Rural Affairs’ Green Food Project and newly created export forum. “But these and other initiatives, such as our own work on apprenticeships and skills, will be at risk if we face energy cost increases on the scale projected,” he added.
Kaarin Goodburn, secretary general of the Chilled Food Association, told FoodManufacture.co.uk that there was a case for the food industry being given special status by the government to help it deal with rising fuel costs.
“There’s a massive squeeze on food producers in this country,” she said. “Commodity prices, let alone fuel, have really escalated. The retailers are not paying for it. There needs to be some sort of recognition of the pressures the food industry is under. The government tends to think it’s all about retail.”
Engineering manufacturers’ organisation EEF has calculated that the floor price will cost UK industry £250M when it begins in 2013 at a rate of £16 per tonne of carbon. The price will then rise each year to reach £30 per tonne by 2020, which would cost industry £1.2bn.
It describes the scheme as “a tax on business” which will put UK firms at a significant disadvantage to EU counterparts, at a time when they are already facing strong competition from America and Asia.