UK Food Industry In Crisis

Posted on: 22/07/2014

I was listening to Farming Today this morning on BBC Radio 4. I usually do. It is the next best thing to waking up on a farm, with the bonus that there is no milking to be done.

Part of this mornings coverage featured 150 farmers demonstrating outside a supermarket, protesting at the fact that the market price of an average lamb has gone down by £25 in the last few months.

I must be a real countryman, because I don't just listen to Farming Today - I also watch Country File on BBC1. Do I recall that within the last year Adam Henson, the programs admirable farmer-in-residence, was happy to get about £85 for a lamb? Does that mean that the price has fallen from £85 to £60 in the intervening period? It seems so.

So sheep farmers have seen about 30% of their income disappear in a few months.Why? Because UK supermarkets can buy lamb cheaper abroad.

Now it would be easy to jump on the bandwagon by immediately criticising UK supermarkets for ripping off British farmers, or selling them down the river or whatever.But before doing that, lets pause for a little analysis.

UK supermarkets are struggling.Tesco same-store sales are down around 4% as compared with 12 months ago. Their investors would no doubt argue that the last thing they can afford to do is pay more to British farmers.

Where has the money gone to that is no longer spent in Tesco? Well, the popular response would be to say Aldi and Lidl - and these two low-margin retailers are certainly growing fast.

However, the answer is a bit more complex than that.

Time for a bit of history.

60 years ago, the average Brit spent around 32% of their wages on food. Today, that figure is around 8%.

What does 8% mean in £'s?

The 30 Million workers in the UK earn on average a bit less than £22,500 a year. 8% of that is around £1800 a year.

Another figure. the average wage in this country has gone down by about 10% since 2008. That amounts to around £2400- or £600 a year more than the average worker spends on food. So, even if the average worker had stopped eating entirely since 2008, they would still be £600 a year worse off now than they were then.

Stopping eating entirely is not of course an option -but cutting back costs is and that's why people are shopping more at Lidl and Aldi now.Prices are on average 25% below mainstream UK supermarkets. So if you are spending £1800 now, you can reduce that by £450 a year by shopping at Aldi and Lidl. Every little helps when you are earning £2400 a year less than you were 6 years ago.

In a nutshell, that explains the crisis in the UK food industry. A hugely reduced % of income is spent on food as compared to 60 years ago and with that income declining by 10% in the last 6 years, the average Brit is cutting back even further on food spending. The result?No money to pay UK farmers from the shrinking profits of mainstream UK supermarkets.

You might ask why is food spending declining so quickly? Answer: because it can.Aldi and Lidl are real and simple to source alternatives.

For the average Brit, changing the direction of ones food-buying outings is much easier to contemplate than cutting back on mobile phone use, pay television viewing or holidays, which is what the wages not now spent on food are paying for. What would have been regarded as luxuries a few years ago are now deemed by most as necessities, whereas food consumption is simply a pit-stop, almost a necessary evil - and with the amount of sugar in most of our food, "evil" is a realistic description. However, lets leave that subject for a future  editorial. 



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