Support needed for the food industry’s ‘squeezed middle’: report

Over 20 organisations from across the 'farm-to-fork' supply chain warned that food and drink suppliers to the hospitality and food service sector risk being over-looked as government considers how to re-open the industry.

Those businesses in the 'squeezed middle' of the food industry – the companies that sit between agriculture and the hospitality and foodservice market have not been given the same level of Government assistance as the businesses they supply, despite being as hard hit by the overnight closure, according to the report by the Food and Drink Industry Roundtable​.

Richard Harrow, chief executive of the British Frozen Food Federation (BFFF), who led the initiative, explained that since lockdown measures were introduced in March, much has been reported about the devastating impact on the foodservice and hospitality sectors. As such, businesses operating in these areas have been offered a range of governmental support.

“While the government’s swift action in support of these sectors is of course welcomed, and will prove invaluable in maintaining viable businesses, there has been a worrying lack of focus on what I am calling the ‘squeezed middle’,”​ said Harrow.

The squeezed middle are the businesses which manufacture and supply food for the foodservice and hospitality sectors – most of them (95%) are small and medium-sized enterprises.

“Many of the 'squeezed middle' are often successful family owned SMEs, supplying the hospitality and foodservice sectors, and are now facing collapse. Support for this important sector is vital to ensure they continue to manufacture and supply world leading products, making the market so dynamic and vibrant. Their continued existence will be critical as the economy starts to recover.”​

Many have seen up to 100% of their customer demand disappear as a result of the closure of hospitality and foodservice and currently have no market, despite being long-established, successful businesses, observed Harrow. He said many also face the prospect of being unable to recover payment for stock supplied prior to lockdown.

He added that while the Coronavirus Business Interruption Loan Scheme (CBILS) or Bounce Back Loan Schemes (BBLS) are in place to offer support, in practice these funds are proving ineffective.

“Recent survey results indicate that fewer than half of food and drink manufacturers have applied for such help, mainly to avoid incurring further debt and additional interest payments beyond year one. Worse still, of those that did apply, fewer than 50 per cent actually received funds. ​

“For those businesses who are predominantly supplying into the wider hospitality and foodservice, government urgently needs to ensure they are supported using similar mechanisms to those in place for other badly affected parts of the economy.”​

The report outlines a series of practical steps Government can introduce to ensure the squeezed middle are able to play their role in a post-virus recovery. These include:

• Businesses supplying into the hospitality and food service industries should continue to receive furlough support through the UK Government at a rate of 80 per cent of salary contribution until those markets return to commercially viable levels.
• The UK Government should place a requirement on the trade credit insurance industry to develop best practice rules of operation which include greater transparency and formal notification of the reason(s) for refusal or withdrawal of cover.
• Insurers should be required to reinstate reduced or withdrawn cover back dated to 1 March 2020, except where there are clear and identifiable reasons as to why this would no longer be appropriate.
• Governments should provide more targeted support for the 'squeezed middle' that does not incur additional business debt e.g. a relaxation of current rules for Apprenticeship Levy funds to allow businesses to maintain existing employment.
• Governments should create schemes for small, medium and micro businesses within the 'squeezed middle' that provide initial cashflow injections to businesses requiring support to secure orders for materials and/or build stock in readiness for the recovery of customer demand.