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, says, “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.”
Factors with a European dimension which are 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.
“We are fortunate to the extent that these price increases are coming at the end of a very benign period for inflation,” adds Dobson. “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.”
Other challenges set out in the Summer 2016 Market Forecast include strong demand for the most popular meat cuts during the peak barbecue season, as well as continuing higher prices for avocados, as producer struggle to keep with booming global demand for Mexican dishes on menus.
Dobson says, “As always, the Market Forecast shows a mixed picture for caterers as they plan summer menus. There are some challenges ahead, but operators able to ‘go with the flow’ and work with suppliers to get the best availability, price and quality will have the advantage.”
The Lynx Purchasing Market Forecast combines official inflation data with exclusive insight from across the range of suppliers Lynx works with. A FREE copy of the Summer 2016 edition can be downloaded at www.lynxpurchasing.co.uk or via the link Lynx Purchasing Market-Forecast-Summer-2016