BREXIT AND THE LABOUR DEBATE

Blaming Brexit and hoping for a good resolution on immigration isn’t going to solve the labour problems facing the food and drink industry, argues David Meller, Director of Ethical Sourcing at NSF International.

Recruitment and retention of labour, especially unskilled labour, is a challenge in the UK. Employers point to the decline in availability of non-UK EU nationals, even before Brexit and the outcome of the government’s policy on right-to-stay and future immigration is known. Forty-four thousand EU citizens returned home in the year spanning March 2016 to March 2017, more than double the previous year. Tulip, one of the UK’s largest meat processors, reported recently about having to bus workers to its different factories to ensure that the necessary labour is in the right place at the right time. According to the Association of Labour Providers,70 per cent of labour providers to the agriculture, food manufacturing and distribution sectors are unable to meet all their clients' labour needs and 36 per cent of labour providers do not expect to be able to source and supply sufficient workers for the Christmas period.

It appears that uncertainty over Brexit is causing EU nationals to rethink their stay in the UK. To date the policy emphasis has been on attracting and retaining skilled workers, ‘the brightest and the best’ who can contribute to the wealth of the country. However, the reliance of the food and drink industry on unskilled and seasonal labour, which represents a large percentage of the workforce, is acknowledged and industry is lobbying hard to keep it top of mind. This month (December 2017), it has been promised, the government will publish a white paper containing recommendations for future immigration procedures. The leaked document proposes a two-year temporary grant of residency for all EU immigrants, but this will hardly deal with the problem.

We Are Not Alone

The lack of availability of labour is not just a problem in the UK; it is an issue facing all advanced economies in the EU, and the UK is in competition for its share. The current economic climate, with the depreciation of sterling, means that the UK is no longer as relatively attractive as a place to work, coupled with the fact that the quality of life has improved in many countries that have until now been good sources of labour for the UK. It takes strong economic incentives to make people leave their homes to work far away in a different culture with a different language. For example, even the large disparity in wealth between northern and southern Italy still does not encourage sufficient economic migration to the north.

There has already been much discussion of the British unwillingness to do hard, uncomfortable and poorly paid jobs in agriculture and since levels of employment are at a record high, there are few incentives for British workers to be interested. It remains to be seen if attempts to attract cohorts of the population including retired people, the disabled and ex-offenders will be successful. It does not help that the food and drink industry has a poor reputation for pay and conditions. Some employers are already reporting that they have had to increase wages to attract staff.

This Problem Will Not Go Away

Longer-term systemic issues also face the EU and the UK. The population is ageing and there are fewer people of employable age. Economic recovery across Europe is in itself hampered by the lack of labour. The labour force in the EU is predicted to grow at a low rate up to 2025 and then to decline.

The market is also restructuring because of increasing globalisation and international competition, new value chains in supply and the effect of new technologies. The accepted principle of the need to eradicate poverty and discrimination is leading to more onerous responsibilities and therefore costs on employers. The ongoing Uber case has been the most high profile. In autumn, an increase in the new national living wage was announced in the UK, raising the minimum wage by 4.4 per cent. It is estimated that 33 per cent of agriculture workers earn the minimum wage.

The government has also signalled its determination to support modernisation and development of technology. Chancellor Philip Hammond has pledged more than ￡500m for digital, data and technology projects, including artificial intelligence and the famous driverless cars. Hammond said the world is “on the brink of a technological revolution” and that the UK has to embrace the future “and build on Britain’s global success story”. The role of automation in replacing labour will be ever more prominent.

Planning Is All

So, what are the options for employers competing for their share of the available labour? As always, the winners will be those who do their homework and prepare their strategy well in advance. Understanding the make-up of your workforce, and where your vulnerabilities lie, is a vital first step. Those who are serious about worker retention and recruitment are looking not just at their workers’ wages and benefits, but at training, career development and new apprentice and training schemes. Creating a business culture where foreign workers feel welcome and integrated is also important.

Inevitably businesses will also be searching outside the EU for new sources of labour. Recruiting responsibly and ensuring that ethical working practices are in place is an essential step for all responsible employers and vital for brand protection. These are all issues that NSF International is helping our clients with every day. But in a climate of competition and uncertainty, these issues become even more important.

The next logical step is to look at automation and to what extent and over what timescale this can replace manual labour. For all but the largest companies this has, to date, mostly not been an accessible option. Now, with government policy supporting new technologies and the larger scale adoption of robotics, this may become a more feasible and cost-effective strategy for some companies.

At the end of the day, it is your customers that matter. It appears inevitable that some labour cost increases will need to be passed on. What is the pay-off between cost and product/service quality? What product sources will the customer accept and to what extent will they scrutinise and weigh provenance, quality and ethics versus price?

This is not just a matter of Brexit, but the age-old issue of competition – those that win out will do so through slick operations, market positioning and strength of their brand. So don’t blame Brexit - is it too much to suggest that Brexit has done us all a favour by forcing us to do a radical rethink?

Whatever your food industry sector, NSF International services can help you meet the demands of your customers, regulators and consumers. From consultancy, training and risk compliance to supply chain assurance, responsible sourcing and auditing, we are your one-stop-shop partner. Separately, we also provide farm assurance and food safety certification.