DRIFFIELD, England, Oct. 18 (Reuters) – When Nigel Upson checks plucked chicken carcasses hanging from a rotating line at his poultry factory in England, he sees his company’s money bleeding out following a collision of events that has turned every part of the farm-to-fork supply chain upside down.
Like food manufacturers across Britain, Upson has been hit this year by an exodus of workers from Eastern Europe who, deterred by Brexit paperwork, left in droves when COVID restrictions were cut. lifted, exacerbating its already high cost of feed and fuel.
Such is the magnitude of the blow, he cut production by 10% and raised wages by 11%, an increase which was immediately matched or improved by neighboring employers in the north-east of England.
Increases in the cost of food will surely follow.
“We are affected on all sides,” Upson told Reuters in front of four large, spotless sheds that each house 33,000 chickens. “It is, to use the expression, a perfect storm. Something will have to give way.”
Worsening problems at Upson’s Soanes Poultry factory in East Yorkshire are a microcosm of pressures on companies in the world’s fifth-largest economy as they exit COVID to deal with post-Brexit trade barriers erected with Europe.
In the wider food sector, operators have raised wages by as much as 30% in some cases just to retain staff, likely forcing the end of a business model that has driven supermarkets such as Tesco (TSCO.L) to offer some of the lowest prices. in Europe.
Following the departure of European workers who often held jobs that British workers did not want, retailers may have to import more.
While all major economies have been hit by supply chain issues and a labor shortage after the pandemic, Britain’s tough new immigration rules have made recovery more difficult, according to businesses.
Already, a driver shortage has resulted in fuel shortages at gas stations and gaps in supermarket shelves, while chicken restaurant chain Nandos has run out of chicken.
The Bank of England is assessing how long a recent surge in inflation will prove to be lasting, forcing it to raise interest rates from their all-time low.
For rural businesses located near flat, open Yorkshire fields, Upson says the situation is dire.
Although he says he needs 138 workers for his plant, he recently had to operate with less than 100. Staff turnover is high.
Richard Griffiths, head of the British Poultry Council, said that with Europeans making up around 60% of the sector, the industry has lost more than 15% of its staff.
When the numbers are particularly tight, Upson asks its sales, marketing and finance staff to don the long white coats and hairnets needed on the processing line.
“Three weeks ago the offices were empty, everyone was in the factory,” he said, of a company that supplies high-end birds to butchers, farm shops. and restaurants. As Christmas approaches, he might turn to the students.
On difficult days, Soanes can only deliver the essentials – chickens crammed into boxes. They don’t have time to tie poultry up for retail sale or put them in separate packages, labeled Soanes, which have a higher selling price.
About 3 tonnes of offal which is normally sold every week goes into the dumpster due to the lack of staff to process it.
Sudden increases in wages and declining production are also adding to soaring costs for animal feed, energy and fuel, carbon dioxide, cardboard and plastic packaging.
“We just told our customers, sorry the price is going up,” Upson said, shaking his head. “We’re losing money, great style.” The poorest consumers would be hit hardest, he said.
Business owners have urged the government to temporarily ease visa rules while they provide staff training and process automation needed to help close the 20-year productivity gap between Britain and the United States, Germany and France.
But far from changing course, Prime Minister Boris Johnson said companies now need to reduce their reliance on cheap foreign labor, invest in technology and provide well-paying jobs for some of the 1.5 million British unemployed.
Upson says there is a shortage of workers in rural communities and with some 1.1 million jobs vacant across the country, people can choose. “Working in a chicken factory is not everyone’s career idea,” he said.
As 5,500 foreign poultry workers will be allowed to work in Britain before Christmas and the UK will offer emergency visas to 800 foreign butchers to avoid a mass slaughter of pigs caused by a shortage at slaughterhouses, industry says it needs more.
As for automation, whole poultry production is already highly mechanized, and although it can be used more for boneless meat and convenience cuts, the cost is prohibitive for a small operator.
The National Farmers’ Union and other food organizations said in a recent report that parts of the UK food and beverage supply chain were “precariously close to market failure”, limiting the ability to ‘invest in automation.
Soanes has an annual turnover of around 25 million pounds ($ 34 million). Over the past three years, its owners have spent 5 million euros on the expansion. Now production must match the size of the workforce.
According to “Chicken King” Ranjit Singh Boparan, founder of Britain’s biggest producer, 2 Sisters, food prices must now rise.
“The food is too cheap,” he said. “In relative terms, a chicken is cheaper to buy today than it was 20 years ago. How is it true that a whole chicken costs less than a pint of beer?”
Upson says he can get a higher price for selling bones for pet food than he can for a chicken thigh.
For large producers, the main obstacle to price increases is often the purchasing power of larger supermarkets, which, since the financial crash of 2008, have struggled to keep prices low for key products such as fruit, vegetables, bread, meat, fish and poultry.
Sentinel Management Consultants CEO David Sables, who guides suppliers on how to negotiate with UK supermarkets, said desperate food producers have already pushed prices up, and he expects another round. takes place early next year.
With chicken being a so-called “item of known value”, the cost of which buyers instinctively know, he said supermarkets would likely push up prices on other products. He described the chicken business as an “absolute horror sight”.
A senior executive from a large supermarket group, who asked not to be named, said retailers were under pressure to “hold the line” on key prices and that they were all watching each other.
“If you see any of the big six moves (on the prize) you can bet your other damn ones will take around 12 hours to follow,” he said.
Back in Yorkshire, Upson and others pray that they will. While he acknowledges Johnson’s desire to move to a “high-wage, high-skill” economy, he said not all jobs fit that bill.
“What skill do you need to put chicken in a box?” ” he asks. “We can increase wages, but prices will go up.” He begins to despair. “Normally you can just be pragmatic and say it’ll work out on its own. But I don’t know where it ends.”
($ 1 = 0.7277 pounds)
Written by Kate Holton; Editing by Guy Faulconbridge and Jan Harvey
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