When QV Realisations – a Lincolnshire-based potato packing and processing company, and part of the AH Worth Group – went under in June, with 200 people losing their jobs, you may have thought it was a one-off. Except it followed the collapse of UK Salads (a key Aldi supplier) to Gomez, a Kent-based fresh produce company that shipped to major supermarkets in February, and the announcement by Bardsley, a fifth generation family business and UK’s second largest apple supplier – that it would have to cease operations.
While Bardsley may have found investment in the form of global agricultural group Camellia, every closure in this industry means significant job losses and a big ripple in our struggling food system. And while the companies all cite unique circumstances for closure, financial difficulties plagued them all.
When you start digging, it’s clear that something’s rotten in the UK food sector. Insolvencies in this sector in 2023 were nearly double the rate seen before the pandemic; 450 firms went bankrupt last year, according to a report by Interpath Advisory, and in the first five months of 2024, there were 168 insolvencies across the food and drink sector.
“The number of administrations for fresh produce were high last year, certainly for fresh produce. For family-owned smaller businesses it’s been tough. The cost of debt spiked, and today, the rates of insolvency are still high,” explains Tom Swiers, director at Interpath Advisory.
In a poll by Riverford Organic Farmers, 62 per-cent of British farmers said they are currently at financial risk, while 61 per-cent said they are likely to give up their farm in the next 18 months. Volatility has been a key theme. Wafer-thin margins plague the fruit and veg sector. Throw in energy price spikes, labour shortages coupled with wage increases, as well as supply chain issues, and you realise there’s a heady cocktail of economic pressures. Add in the toll of extreme weather and the unfair behaviour of the biggest supermarkets, and it’s no wonder that so many fresh produce businesses are on the edge.
The sector has been steadily declining year-on-year, which means we’re more reliant on imports. But we can’t rely on imports from other climate vulnerable countries forever. There’s a real food resilience issue here. Will White, Sustain
A tail of devastating decline
The challenges are perhaps less severe than they were at the end of 2023, with inflation now easing and energy prices stabilising, but the fallout from those tough times is still being felt across the sector. With little money in the bank, few businesses are in a strong position to invest in the future of British food and farming – ‘just surviving’ is the best they can do.
“Since the Russian invasion of Ukraine, we’ve seen hyperinflation and then a massive hike in interest rates. This crippled a lot of fresh produce businesses that typically run on margins of one or two per-cent. The escalation in production costs and then an increase in bank charges, coupled with a reluctance from retailers to pass on costs to consumers, has squeezed every bit of the industry,” explains Jack Ward, CEO of the British Growers Association.
It’s not surprising that the Soil Association wrote an open letter to the Prime Minister in June, supported by many organisations in the industry, talking of a ‘sector in crisis’ and one in ‘devastating decline,’ where ‘half the growers fear for the survival of their business.’
Last year, vegetable yields decreased by nearly five per-cent, down by 2.2 million tonnes, according to government stats. The area planted for vegetables was slashed by 6.5 per-cent to 101,000 hectares.
“The sector has been steadily declining year-on-year, which means we’re more reliant on imports. But we can’t rely on imports from other climate vulnerable countries forever. There’s a real food resilience issue here,” states Will White, sustainable farming coordinator at Sustain.
Reasons to be worried
Today, almost half of the veg we consume and more than 80 per-cent of fruit comes from overseas. Less than two per cent of all farmland is used to grow fruit and veg. Double the land is needed, states the open letter.
“I don’t just think the sector is unsupported, I believe it’s unloved by policymakers, and worse than that it is totally unrecognised for its importance. I think there are really deep reasons to be worried about food security in the UK. At what point do policymakers wake up and really smell the coffee?” points out Dr Clive Black, a director at Shore Capital and a previous head of food policy at the National Farmers’ Union.
British consumers hold home-grown fruit and veg in such low regard, that the UK confectionary market generates twice the income as this sector. Absurdly, more land in Britain is used to cater for the game of golf or for grouse shooting, neither of which feeds a hungry nation of 67 million people.
The tide may be turning though.
“Continuity and security of supply have suddenly become a big thing. Has the nation got a resilient supply of fruit and veg? This is the big question. What we’ve seen over the past 18 months – and the first time in probably 25 years – is empty shelves. We need a better plan for our fresh produce sector. We cannot leave it to chance,” Ward points out.
Fruit and veg has long suffered from a chronic lack of long-term investment. It’s difficult for the sector to borrow for new orchards, polytunnels or machinery when there’s so much volatility, contracts are uncertain and where there’s little money left at the end of the month to reinvest. A report from the NFU at the beginning of the year showed that production costs had gone up by as much as 39 per-cent, while already operating on infinitesimal margins; it’s no wonder the industry is running on empty.
Consolidation and less resilience
So what will the fallout be? Further consolidation is likely, with the fresh produce sector becoming more concentrated in the hands of a smaller number of larger businesses and fewer people. This has already happened in some sectors. For instance, there are only eight or so major carrot growers in the UK and seven or eight large brassica growers.
“Those firms that aren’t huge or vertically integrated are often the ones going insolvent. This leads to a loss of diversity in supply. A highly consolidated industry in the UK means the economic benefits are going to be much less localised. Less money will be dispersed to rural communities and more will go to centralised big businesses,” points out White from Sustain.
“Such consolidation does not build resilience. Just look at what happened during the pandemic, or during extreme weather events with supply chain shocks. This exposed the fragility of our mainstream and centralised supply lines to retailers. It was localised supply, which is still most prevalent in rural communities, and smaller businesses that thrived and met demand.”
Calls for change from the sector are legion, many are fed up with the longstanding, laissez faire approach from Westminster that has left the food system to the free market and where responsibility for a supply of fruit and veg is dispersed between a myriad of central government departments and local authorities.
Many are now asking for a joined-up approach to policy, with more partnerships between retailers, growers and the supply chain with the aim of creating a healthier economic environment, which will then encourage future investment.
“We’ve had horticultural businesses going bust for years, but what’s different now in a post-Covid world is that our food system needs to be considered with respect to security of supply. In a world of de-globalisation, increased trade friction, as well as more bio-insecurity, feeding the nation should be a top three priority, alongside keeping people warm and keeping people safe. The government should be taking this issue seriously – but there aren’t enough alarm bells ringing,” warns Dr Black.
“For some time, I’ve called for a ‘minister of the food system’ who reports to the prime minister and coordinates a policy of improving or reducing imports of fresh produce, but also delivering for all stakeholders. A minister that makes sure that we’re producing wholesome fresh produce that people want, while supporting local demand and supply.”
At the end of the day, if we’re to stop the rot in the industry, we also need to pay more for fruit and veg.
“The government needs to be honest. This is where consumer groups need to be honest. It’s where environmental groups need to be honest. If you want a well-paid workforce, if you want kindness to animals, if you want clean water, if you want increased biodiversity, if you want security of food supply, and you want that supply to be safe and wholesome, you’ve got to pay for it,” concludes Dr Black.
Amongst doom and gloom and I am sad that it is a reality, I love reading stories of groups of people cultivating small areas and producing lovely home grown local food almost in defiance of the ‘big boys’.