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With government cuts and food security issues, food manufacturing must change the rules of its game, reports Rick Pendrous.

Business as usual just won’t do. Britain’s food sector faces some big challenges and unless government and the industry start working more collaboratively the consequences over the next 15 years could be dire, says Nick Bunker, president of Kraft Foods UK and Ireland.

Britain's food manufacturers have thrown down the gauntlet to the coalition government. In new research commissioned by the Food and Drink Federation (FDF) looking at Future scenarios for the UK food and drink industry, a call is made for a more coherent strategy from the coalition than that experienced from the last Labour government.

Launching the report by the Institute for Manufacturing's (IfM's) Centre for Industry and Government at the University of Cambridge in London, Bunker, chairman of the FDF's competitiveness steering group, said: "We need to change the rules of the game and that will require new leadership from government as well as from industry; the creation of genuine partnerships between the food sector and different Whitehall departments; and the willingness on all sides to accelerate the good work that is underway."

This is the second piece of work commissioned by the FDF from the IfM. The first, published earlier this year, set out to highlight the value of the sector to the UK's economy. And following the latest research, which paints pictures of what 2025 might look like from the sustainable to the downright scary a third piece of work may follow. This could describe how exactly to put the necessary strategies into action. The notion is that this could steer us away from the worst consequences of things like climate change and a global population explosion, which will put severe stress on supplies of limited raw materials and resources .

Evidence for action

"There is the beginning of some evidence to underpin future action," said professor Mike Gregory, who heads up the IfM. "There is more to be done there, I would suggest; the evidence in this kind of exercise is largely opinion; but it's informed opinion it's a case for consistent and coherent regulation." Bunker agreed: "We do need a better degree of coherence and consistency."

The FDF and its members have been quick to praise what they have seen so far from the new coalition government, which has hinted about reducing the regulatory burden on industry and proposed Health Secretary Andrew Lansley's new 'responsibility deal'. However, manufacturers clearly want to get a bid for greater recognition in early certainly before the ink dries on policy details that will accompany the radical shake-up of government departments that will follow the comprehensive spending review to be announced on October 20.

The spending review will dictate government policy over the next five years of this parliament and could have major ramifications for UK Food plc both good and bad. So the industry recognises it must get its message across now.

The National Farmers' Union (NFU) is particularly concerned about the potential impact of swingeing budget cuts at the Department for Environment, Food and Rural Affairs (DEFRA).

NFU head of policy services Andrew Clark said: "The choices DEFRA must now take cannot be characterised as 'environment versus production' this is too simplistic." The NFU is arguing that DEFRA should first prioritise efficiency savings and reduce back office costs, rather than front line delivery. "Ministers should also identify ways in which these outcomes could be provided at lower cost or in different ways, perhaps in partnership with the industry," said Clark.

He added: "It is too soon to identify which DEFRA functions will be affected by the comprehensive spending review, but such severe cuts in DEFRA's budget [£162M of cuts from a budget of £3bn have already been announced] mean that 'efficiency savings' will be insufficient to protect front line activity. In this context the NFU will continue to argue that DEFRA ministers must avoid cuts where it would damage the long-term competitive prospects of British farming."

Both the NFU and FDF have similar concerns. "The report published by the IfM confirms the many issues that we all know will impact our sector in the medium to long term," said Bunker. "[It] publishes a picture in some ways not very pretty of the very real challenges that food and drink manufacturers will have to address as we look to maintain the nation's future food security against the combined effects of climate change, high level of demand for agricultural products and increasing pressure on finite resources."

Bunker went on to highlight the impending staffing crisis facing the sector as the average age of employees increases: "With over a third of the workforce due to retire in the next 20 years we believe that support for promotion of the sector as a career of choice is vital to our future growth."

Industry at heart of economy

Increasing volatility of ingredient prices is also a major challenge that is unlikely to go away, he added. "Agreeing how industry and the government should respond strategically to those sorts of challenges is rightly a priority for the FDF, as is encouraging government to put our sector at the heart of its economic thinking as we seek to rebalance the UK economy."

Specifically he called on government to provide "a fiscal framework that, amongst other things, promotes resource efficiency, stimulates innovation and ensures above all else that the UK will attract the level of investment that will be needed if our sector is to continue thriving in the decades ahead".

Simon Baldry, vice president and general manager for Coca-Cola Enterprises GB, while recognising the major challenges facing the sector, expressed optimism for the future. But with caveats. He added: "Our industry does believe we have a capacity for growth, but it's critical that we can do that without regulation impeding us."

It was a theme picked up by FDF president Ross Warburton: "I think we've got a very, very robust shell on our tortoise body. So, I would be very optimistic, I think we are very resilient."

Following publication of the spending review everyone should be a lot clearer about precisely where the axe will fall on government spending. While the public sector will inevitably suffer the lion's share of cuts, there will be ramifications for the private sector and food manufacturers specifically. These will be experienced both directly, through cuts in research grants and tax relief, and through reduced indirect support, in areas such as the advice freely available now to small manufacturers through their local environmental health officers.

Consistent regulation

"When looking at this and having dialogue with government, there is a strong case for a stronger partnership," said Bunker. "And certainly in many cases it is not necessarily a question of funding, it's a question of the consistency of regulation alongside it. And that, certainly in a company like ours, is a bigger challenge than the funding itself it's about giving firms the confidence to invest."

Baldry supported this view: "We are going to have to find from our own resources the capacity to make the sort of change that we require. In many respects we've been doing that for some considerable time we've less government grants than any other industries. The fundamental [issue] is that when we actually decide to invest to drive change that's right for our business, the market doesn't move because of regulation. That is the most difficult situation for us to face."

He gave an example: "We are very interested in the role we might play in helping the fledging plastics reprocessing industry. But if there is going to be regulation and there is currently discussion around that, about the input cost of PET [polyethylene terephthalate] then that in itself will have a different perspective on how we have to look at it.

"Clarity there [will] enable us to make decisions to invest without government support as long as government issues and regulation don't come back in to disrupt the economics of that primary investment."

Warburton remarked that the government doesn't spend very much in support of food manufacture, but the small sums it does spend can have a major impact and its removal can cause severe damage. "It's unfortunate when we have the demise of things like Food from Britain; when useful amounts of money that have a disproportionate positive effect on assistance as a whole [are removed]."

He advised the government: "Be careful about taking something small away because while you might not see the impact in the short term you almost certainly will see it in the long term. And quite often the small amounts that do get put into food and drink manufacturing end up benefiting the small- and medium-sized enterprises and they are the future."

But, as FDF director general Melanie Leech pointedly remarked, the public don't always see innovation in the agrifood sector as beneficial. She cited the example of genetic modification and nanotechnology. "They are not necessarily seen as a good thing. Whatever view you take about them, what government can do is encourage a debate about the role of potentially new technologies and explore those in a neutral and unbiased way."

This was a call subsequently echoed by Labour's former science minister, Lord David Sainsbury.

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