Uncertainty in the City over the outcome of the referendum on June 23 has seen sterling fall in value against both the euro and the dollar across the spring and early summer, pushing up fresh produce costs during a key period for imports.
The newly-published summer 2016 edition of the Lynx Purchasing Market Forecast shows a range of factors linked to the European debate combining to put upward pressure on the prices being paid by caterers.
Rachel Dobson, Lynx Purchasing managing director, said: “Both the City and the supply chain thrive on certainty. There are clearly very strong views in both camps as to whether Brexit would be good for the UK in the long-term, but there’s no doubt that the extended debate before the referendum is having an impact.
“We are fortunate to the extent that these price increases are coming at the end of a very benign period for inflation. Prices are building back up again from a low base, which gives operators time to plan. However, we expect a return to inflation later in the year regardless of the outcome of the referendum, and we advise all operators to look carefully at their costs.”
Lynx Purchasing suggests the factors causing challenges for suppliers include:
- The weakening of sterling has hit the price of imports both from Europe and further afield. Summer salad produce such as tomatoes, lettuce and cucumbers is mainly imported from Europe, and more pork is also being imported as UK production declines. Key commodities such as coffee and bananas are traded in dollars, also pushing up the prices paid by caterers.
- The availability and cost of labour; the introduction of the National Living Wage in April has already increased labour costs, which are significant in an industry which has to work on low margins. Producers rely heavily on migrant labour from the EU for seasonal work such as picking and packing, and are worried about the longer term availability of these workers and the effect on their costs in the event Britain leaves. Higher prices for fuel are being paid by UK companies shipping from Europe, along with increased costs due to the migrant crisis. Hauliers have significantly increased the charge extra per pallet year-on-year to cover increased insurance costs - if a migrant is found in a vehicle the whole load is disposed of. There is also an additional cost in time for drivers delayed at ports.
The Lynx Purchasing Market Forecast combines official inflation data with insight from across the range of suppliers Lynx works with. Lynx Purchasing works with more than 2200 businesses, including pubs, restaurants, healthcare and education providers.