Fears over Brexit drive up food and drink costs, warns Lynx

Young Man Picking Strawberries Lynx Purchasing

Market fears over the UK’s potential exit from the EU are driving up food and drink costs for bars, pubs and restaurants, warns buying specialist Lynx Purchasing.

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.”

The weakening of sterling has hit the price of imports both from the rest of Europe and further afield. Summer salad produce such as tomatoes, lettuce and cucumbers is mainly imported from within 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.

Lynx Purchasing also highlights factors over 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 within 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 if Britain exits.

Higher prices for fuel are being paid by UK companies shipping from other parts of Europe, along with increased costs due to the migrant crisis. Hauliers have significantly increased the charge 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,” Rachel added. “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 Lynx Purchasing’s 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 producers struggle to keep up with booming global demand for Mexican dishes on menus.

Rachel said: “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 that Lynx works with. A free copy of the summer 2016 edition can be downloaded as a PDF by clicking here. http://www.lynxpurchasing.co.uk/wp-content/uploads/2016/05/Market-Forecast-Summer-16_Low-res-1.pdf.

Lynx Purchasing works with more than 2,200 businesses including bars, pubs, restaurants, hotels, healthcare and education providers, offering access to the best prices in the market, with no fees or contracts.

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