Skills gaps and labour major concern for manufacturers - BDO

The firm said industry is heavily reliant on EU labour with one in three workers coming from the region.

BDO’s Food and Drink Report 2018 is based on a survey in March this year with 63 respondents from businesses in the UK.

Only 2% of respondents expected Brexit to have a positive impact on labour and skills and 55% were downbeat. A third said Brexit could have a negative impact on access to raw materials.

Two thirds (63%) want to make better use of staffing resources and half (54%) aim to improve materials utilisation and reduce waste.

Skill shortage concern and automation growth​

Paul Davies, head of food and drink at BDO, said: “The majority of firms we’ve spoken to believe that Brexit is likely to have a negative impact on attracting labour and skills in the future, and naturally that’s becoming a growing concern for them.”​

BDO found the objective for almost 50% of current automation projects by manufacturers is to boost productivity.

3V Natural Foods, which owns the Rocks Drinks and Meridian Foods brands, has operations that are labour intensive due to its product range and production flexibility.

Neil Butler, finance and operations director, said: “If Brexit results in a restricted labour supply, this could result in upward cost pressure and so we are proactively seeking to increase automation in our processes over the next two to three years.”​

However, there is little evidence skills shortages are affecting industry today.

Three years ago, 70% of survey respondents were having problems finding the right people but in 2017 it dropped to 57% and this year it went down to 54%.

The report found 60% of manufacturers surveyed are generally positive about the future with three quarters (76%) expecting revenue growth and 67% believing order levels will increase in the next year.

However, over the last three years, confidence among manufacturers has fallen 20% and Brexit uncertainty is posing the biggest threat to businesses for the year ahead.

FDF business confidence survey​

In a separate survey, the Food and Drink Federation (FDF) analysed business confidence of food and drink manufacturers in the UK.

Results from the FDF Q1 2018 survey show over half of manufacturers polled believe general business conditions have remained the same compared to the last quarter of 2017.

More than 25% said conditions had deteriorated while fewer than one in five have seen them improve.

Manufacturers identified a rise in domestic demand, planned investment in product launches and increased desire for healthy food products as opportunities for the rest of the year.

Around two-thirds expect a rise in input prices, with heightened ingredient costs ranked the top barrier to success during 2018 followed by exchange rate volatility and uncertainty over the UK's relationship with the EU.

FDF chief executive Ian Wright said it was encouraging to see business conditions have remained stable.

“It is not surprising that the industry is fearful over the uncertainty that surrounds a post-Brexit UK-EU relationship, and the results rightly reflect this as a barrier for business in the coming year. Despite the woes of Brexit, it is great to see that food and drink businesses have found hope in the ever expanding demand for healthier food products.”​

FDF conducted the survey between 4-19 April and 60% of responses came from small and medium-sized enterprises (SMEs).