The Food & Drink Federation (FDF) revealed the situation in its Q3 2021 Business Confidence Report, which has just been published summarising the views of its members and industry figures.
It found that net business confidence fell by 55% in the third quarter of 2021, dropping to -51%. This was the lowest net confidence rate measured by the report since the height of the pandemic in the second quarter of 2020 (-65.2%) and the biggest drop in confidence since the FDF began reporting it in 2018.
It revealed that severe supply chain disruption was the biggest cause for concern, particularly the transportation of goods with 93% experiencing delayed or missed outbound deliveries and 75% reporting delayed or missed inbound deliveries.
Most common labour shortages
Labour shortages also remained across a range of roles in the food supply chain. The most common shortages were HGV drivers, temporary agency workers and process, plant and machine operatives. Half of respondents said they expected the permanent supply of labour to decrease and 54% expected the temporary supply to decrease in the fourth quarter of 2021.
As product margins were squeezed, driven by wide-ranging supply chain disruption and rising production costs an overwhelming majority of businesses anticipated continued price rises. The majority (97%) of respondents expected consumer price inflation to increase in the fourth quarter of 2021.
The results showed a lack of confidence for the future as businesses were full of pessimism with a further decline in business confidence anticipated. Half of respondents expected a further decrease in business confidence in the final quarter of 2021.
'Continuing supply chain disruption'
“These results - compiled before the Prime Minister’s disappointing announcement yesterday [the reintroduction of advice to work from home and restrictions such as mandatory face mask wearing and the requirement for COVID passes under Plan B] - demonstrate that confidence levels across our sector have been hit by continuing supply chain disruption,” said FDF chief executive Ian Wright.
“On top of this, the confection of increasing uncertainty about Omicron, the UK’s changing trading relationships, and the re-ignition of inflation, all threaten to undermine resilience across the sector. Many businesses now expect disruption and reduced service levels to continue right through 2022 and into 2023.”
In October, Wright warned that action needed to be taken to curb the ‘terrifying’ rate of food inflation in the UK.