Living Wage caused 7k food firms ‘financial distress’

By James Ridler contact

- Last updated on GMT

More than 7k food and drink manufacturers reported financial distress caused by the National Living Wage
More than 7k food and drink manufacturers reported financial distress caused by the National Living Wage

Related tags: National living wage, Minimum wage

Up to 7,803 UK food and drink manufacturers are now in a state of financial distress following the introduction of the National Living Wage, revealed insolvency firm Begbies Traynor.

This was a 22% rise compared with six months ago, when the regulation was introduced on April 1 2016.

The figures were part of the insolvency firm’s research into 97,342 businesses that had experienced financial difficulties following the introduction of the standardised wage for workers over the age of 25.

Julie Palmer, partner at Begbies Traynor, said: “With many food and beverage manufacturers struggling to absorb the costs of the National Living Wage, this new legislation appears to have put added pressure on firms’ ability to compete in the global marketplace.

“This increased stress for food and beverage manufacturers will mean other measures will need to be taken to manage their growing cost base.”

Cut staff numbers

Palmer suggested that businesses have had to cut staff numbers, reduce bonuses and pass on the increased costs to the consumers to help counter the cost of the Living Wage.

“What’s more, further challenges lie ahead for food and beverage manufacturers, with plans to increase the National Living Wage to £9 an hour by 2020,” ​added Palmer.

“Meanwhile, the impact of Brexit remains to be seen on this industry, which could be heavily impacted by reduced access to skilled labour from the EU.”

The Food and Drink Federation (FDF) said that its members had not reported any financial distress caused by the introduction of the National Living Wage.

However, members did raise concerns about the impact of the Living Wage where employers needed to maintain a differential between roles paid at National Living Wage and higher skilled roles, as well as premiums for shift and weekend work.

Concerns around the proposal

FDF competitiveness director Angela Coleshill also said that, in the longer term, there were concerns around the proposal to increase the National Living Wage rate to £9 per hour by 2020.  

“Food and drink manufacturers have real concerns about the cumulative effect of the National Living Wage, the introduction of the apprenticeship levy and the skills levy for tier two migrants next April and the immediate impacts of Brexit,” ​Coleshill told FoodManufacture.co.uk​.  

“This is increasing pressure on our members and across the supply chain. As a result, food and drink manufacturers may be forced to push up prices, whilst retailers will continue to look for more competitive margins.

Cox said the changes came at a time when the food and drink industry was focused on improving productivity and raising living standards, as well as investing in higher level skills long-term.

National Living Wage causes spike in business distress – at a glance

Businesses that experienced financial distress after the National Living Wage was introduced

  • 7,803 food and drink manufacturers 
  • 13,772 wholesalers
  • 13,071 logistics firms
  • 10,019 food and drug retailers

Related topics: Services

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