Memorandum submitted by the Food and Drink Federation (SFS 29)

Executive Summary


􀂃 Food security is a complex issue, involving a chain of production and distribution. Consumers also need enough purchasing power to buy what they need.


􀂃 Food security in the UK is intrinsically linked to the health of the whole supply chain - farmers, processors and retailers. UK food and drink manufacturers buy some 2/3 of the UK's agricultural output. Without this processing capacity UK farmers would not have a market, now or in the future. We also rely on international trade for the choice and variety of diet and year round availability that UK consumers currently demand.


􀂃 The longer term balance of supply and demand is a global challenge. Climate change introduces whole new areas of uncertainty to a set of existing risks, which already include pressure on energy and water supplies vital to feeding the nation on a day to day basis.


􀂃 Managing and mitigating these risks will require integrated policies which prioritise food security as an objective in its own right, particularly in the regulatory area. We also need to maintain and enhance knowledge and skills to provide flexibility, innovation and resilience to make the most of what we have, now and in the future.


􀂃 The UK food and drink industry currently provides a wider range of affordable and wholesome food to more people than at any time in our history. We need to build on these strengths through a clear and shared strategic framework to help Government and industry avoid short term difficulties and the risks of market failure eroding critical mass and undermining the further capabilities we need to develop.



1. The Food and Drink Federation (FDF) represents the UK's food and drink industry, the country's largest manufacturing sector. The industry directly employs around 440,000 people, widely dispersed across the country in 7,000 companies of all sizes, and more than twice that number in a range of ancillary services. It has a turnover of 72.6 billion, produces a gross added value of about 16.5 billion a year and is a key partner of British agriculture and aquaculture - buying approximately two-thirds of what our farmers produce. Consumer spending on food and non-alcoholic drink amounts to some 129 billion a year. The industry is also a major player in international trade - and we export some 7.5 billion worth of food and non-alcoholic beverages a year, mainly to Europe.


2. Issues related to food security are highly relevant to the industry's own interests and to the role it plays in providing safe, nutritious, varied and affordable products for consumers, in the UK and elsewhere. Moreover, following the progressive disposal of Government-held stocks, the industry's own storage facilities (together with those of the retail supply chain) now constitute the nation's strategic reserves in the event of civil or other emergency.


3. The industry is very aware of the potential impact of climate and demographic change, environmental degradation and possible shortages of fossil fuels and water - at both national and global level. That is why it is increasingly engaging with efforts to reduce its carbon footprint and to promote increased efficiency of resource use, for example through the FDF's Fivefold Environmental Ambition, which sets targets for cutting CO2 emissions, reducing water use and transport miles, minimising packaging and sending zero waste to landfill.


4. The FDF is keen to assist the Committee with its inquiry and offers the following responses to the questions posed.


How robust is the current UK food system?

5. Assessing the robustness of the UK's current food system depends on how food security is defined. There are many different approaches, but most involve physical and economic access to sufficient safe and nutritious food combined with supporting active and healthy life. The level of national self-sufficiency for particular foods has a role to play, but is not itself a determining factor.


6. On these broad criteria, the UK currently enjoys high levels of food security and arguably a wider range of affordable and wholesome food available to more people than at any time in our history. With rare exceptions, shops are fully stocked at all times. Even 20 or 30 years ago, seasonality would have affected the range of foods on offer. But improved access to world markets and advances in agronomy mean that most products are now available all year round. The efficiency of the manufacturing sector and supply chain is another key factor, as few foods are grown and consumed locally without some form of processing.


7. Likely risks to short term supply centre on issues relating to transport, energy and other forms of civil contingency, rather than on the availability of food as such. Maintaining fuel supplies is critical for both manufacturing and primary production. Recent experience suggests that the UK food system is relatively robust in the face of brief or localised disruption, though prices did increase significantly in response to world conditions in 2007/08. Prolonged or more widespread disruption, particularly to supplies of energy or clean water, would undoubtedly pose a major challenge and require direct Government intervention in support of the industry's own efforts. But, depending on the availability of unaffected imported supplies, it ought to be possible to avoid widespread food shortages.


8. By way of comparison, it is worth noting that adequate food supplies were largely maintained throughout the Second World War, though there were major adjustments to what was available, where it came from and how it was produced.


9. Public perception of what constitutes an acceptable level of supply is also likely to change in response to the severity of any emergency and who is seen as responsible. Shortages outside obvious national control (such as those resulting from major weather events or disasters) are more likely to be tolerated than those arising from failures in infrastructure or poor commercial or public policy decisions.


10. Common to all such disruptions to supply, however, is the extent to which the identification, assessment and management of risk can mitigate their worst effects. The food and drink industries have a long and good record of cooperating with Government and its agencies in these areas. But modern supply chains keep physical stocks to a minimum to save cost. This increases vulnerability and dependence on logistical systems to ensure needs are met. Small failures can have disproportionate consequences in such circumstances.


11. In the longer term there is now established consensus that we face a different set of risks relating to the basic balance of supply and demand. World population is expected to grow by 50% by 2050 and demand for food to double. Increased prosperity will also accentuate competition for resources as more people enjoy higher protein diets. Renewable energy needs may also impact on water use and food crop production. Policies aimed at developing biofuels need to take proper account of food security concerns.


12. At the same time, climate change is likely to reduce available agricultural land and increase harvest volatility. Shortages of energy and water may further reduce output. Mass migrations may compound other changes in patterns of production and trade. Even if some of these impacts may be less extreme in the UK, we will inevitably be affected as part of the global economy.


13. The ability of political, economic and market forces to cope with these challenges remains unknown. Nor is it clear how linear these processes might be, or when tipping points might occur. Risk management will again be vital, as will the extent to which people are prepared to modify their expectations in the light of changing circumstances.


What are its main strengths?

14. The current UK food system is as strong, diverse and competitive as any in the world. It has a good record of innovation and meets high standards of quality and safety, beyond regulatory requirements. But continued profitability and investment will be essential to maintaining and improving this. Food and drink businesses are as dependent as any others on levels of consumer spending, interest and exchange rates, the availability of credit and their ability to attract and employ sufficient numbers of sufficiently skilled staff.


15. Another key factor is the industry's ability to buy efficiently from EU and wider world markets to improve the range of products on offer and complement its use of home-grown raw materials. A variety of suppliers is also inherently more robust than reliance on single sources.


And weaknesses?

16. As already noted, the industry is heavily reliant on energy and water supplies and also on a range of other ancillary inputs such as packaging. In general the more sophisticated the product, the more vulnerable it is to interruptions in essential inputs. In the short to medium term, energy security and water security are probably more relevant to UK food security than the industry's ability to source raw material supplies in what is still a relatively abundant world market for primary agricultural and fisheries production. In the longer term, and depending critically on climatic, socio-economic and political conditions elsewhere in the world, the ability to source and transform sufficient staple foods within the UK is likely to become increasingly important.


17. Maintaining sufficient productive capacity in both domestic agriculture (and fisheries) and in our own processing industries needs to be given appropriate strategic priority, as market forces alone will not necessarily guarantee the continuity required. This needs to extend to regulatory and other decisions affecting the context in which the food chain operates, in order to ensure that there is an appropriate balance between long term resilience and more immediate policy requirements. National standards in areas like animal welfare or food safety which go beyond those applied elsewhere may also adversely affect the relative competitiveness of UK producers. Maintaining a level playing field may involve difficult compromises e.g. in relation to pesticide use or planning consents.


How well placed is the UK to make the most of its opportunities in responding to the challenge of increasing global food production by 50% by 2030 and doubling it by 2050, while ensuring that such production is sustainable?

18. The UK food and drink manufacturing industry already provides a market for over two thirds of the UK's agricultural production. Maintaining a strong domestically based processing sector will be vital to exploiting any increase in output should climate change improve the UK's comparative advantage in temperate products. The ability to process close to sources of production is also likely to be inherently more sustainable than transporting bulk materials over large distances. Maintaining a critical mass of manufacturing capacity in the UK will be essential to maximising these opportunities. Access to the relevant technology and R&D specific to UK circumstances are other necessary conditions along with the ability to make appropriate capital investments. This requires a sufficiently stable long term framework for business and one which looks at the totality of issues, including regulation, training and an appropriate UK science base.


19. The industry also adds value to a range of imported supplies using the skills it has developed, in areas like preserving nutritional value, improving shelf-life and minimising waste. UK companies are well placed to make less food go further and get maximum benefit from it, including the development of new uses for by-products and ways of conserving and recycling resources used in production. Driving the efficiency of resource use is one of FDF's key aims and vital to both sustainability and competitiveness. FDF is keen to work with Government on these issues. Continued profitability is essential to providing the platform for future expansion. Attempting to regenerate capacity or re-acquire expertise may not only be disproportionately expensive, but may also simply not be possible in the then prevailing circumstances.


What are the challenges the UK faces in relation to the following aspects of the supply side of the food system?

Soil quality

20. The UK has a long history of cultivation and industrialisation. It is also relatively densely populated. Most land suitable for agriculture has already been identified and improved and some has already been lost to competing land uses. In these circumstances, conserving soil quality has to be a high priority, not least because of its close links to water issues. Good nutrient management and proper control of other chemical inputs is essential to both. In terms of food security, the challenge is to balance the maintenance of future productive potential with meeting current needs. This requires a proportionate regulatory framework within a longer term land use policy, which recognises food production as a strategic priority and also takes account of environmental and biodiversity concerns, including the role of soil in the carbon and nitrogen cycles.


Water availability

21. Achieving significant reductions in use to help reduce stress on the UK's water supplies is already one of FDF's Environmental Ambitions. The same challenge applies to agriculture, other industries and to domestic consumers. Water shortages which inhibit production in the UK will lead to increased reliance on imported food supplies, which in an era of scarcity would almost inevitably lead to higher economic cost. So timely action to promote efficiency of water use and increase availability is a form of spend to save, as well as helping to promote wider food security. Market signals are still very weak in this area, particularly in relation to the longer term benefits. But simply increasing the cost of water to users in the short term risks distorting markets and moving both food production and food processing to countries not following similar policies.


The marine environment

22. Properly managed fisheries have the potential to provide enormous benefit to the nation's food supply, particularly in nutritional terms. Marine fisheries require no inputs other than the energy involved in capture. And responsibly fished stocks are effectively a renewable resource. The UK is particularly well placed to exploit these opportunities, provided that sufficient base capacity can be maintained while improved conservation and stewardship policies take effect. Aquaculture also has the potential to make a significant contribution to food security alongside sea fisheries.


23. But, as in the case of agricultural land, there are increasing issues of spatial planning in relation to the maritime environment, in relation to a range of competing uses, other than food production. The oceans also have a key, but relatively poorly understood, role in relation to climate change and the carbon cycle. Research into these issues is even more subject to market failure than in the case of land-based equivalents, because questions of ownership are much less well defined. The integration of policies relating to the marine environment - and the funding of adequate research to support them - is therefore primarily a task for government, at national and international level. The history of cooperation and success in these areas is not good and achieving the required step change in performance is itself a major challenge.


The science base

24. The need for relevant expertise appropriate to UK conditions is a consistent theme in many of the above responses. Another is the need for innovation and flexibility to able to respond to a range of possible circumstances. Both the degrees of uncertainty involved in many of these issues and their probable timescales make many of them inappropriate for industry funding in a normal commercial or near market context. Ongoing research and development is essential in order to meet these challenges. In addition the industry needs a consistent flow of good food scientists and technologists. In recent years, public funding for agricultural and food science has been reduced. Reversing this is probably the single area where government can make the most immediate and direct impact.


The provision of training

25. Training is another aspect of the knowledge and skills base which it is essential for the UK to maintain and enhance. Industry clearly has a lead role in this, alongside educational providers. But again there are issues of profitability and market failure which may prevent companies adopting the best long term strategies, particularly in current trading conditions.


Trade barriers

26. Notwithstanding the potential for an increased role for domestic supply in response to longer term threats to food security, imports of food (as raw materials, semi-processed and finished products) have made a major contribution to UK food supplies since the industrial revolution. Diversity of sources is also another key feature of resilience in the supply chain. It is therefore a high priority for the UK to maintain and improve access to global markets and also to maximise its own export potential. The key to this is a genuinely open international trading system. The FDF fully supports efforts to achieve multilateral trade liberalisation and the role of the WTO in enforcing a rules-based international system where the use of subsidies is restricted to non-distorting measures. We see this as an important element of helping to balance global supply and demand in years to come.


The way in which land is farmed and managed

27. Beyond the points above relating to soil, water and the need for a longer term strategy for land use, the FDF has no particular comments on the way land in the UK is farmed and managed, other than that consumers need to be able to have confidence in the quality and traceability of products and that necessary regulatory requirements have been met.


What trends are likely to emerge on the demand side of the food system in the UK, in terms of consumer taste and habits, and what will be their main effect? What use could be made of local food networks?

28. There seems to be a disjunction between attempting to analyse emerging trends in consumer tastes and habits and assessing the prospects for securing food supplies in an increasingly uncertain future. Although there is growing public awareness of climate change and its possible consequences, there is little evidence to date of this having any material effect on patterns of current consumption. As noted earlier, the range and diversity of food and drink products available in the UK is probably greater than ever before and there are no signs that consumers wish this to be restricted in future. There is evidence of a more direct link between disposable income and choice, suggesting that consumption responds more readily to price signals than to any wider concerns about the impact of production on the environment or the sustainability of food supplies in general.


29. There is also a growing debate about diet and health. This will also affect consumer choices and the way manufacturers formulate products. But it is difficult to predict the effect on aggregate demand. More use of fresh produce and localised sourcing may affect some processing sectors. But it is similarly difficult to assess the implications of this, including for food safety in respect of storage and production standards.


30. Consumers are also increasingly interested in how their food is produced and the quality, technical and ethical standards involved (e.g. in relation to both animal welfare and human labour). There is also caution over the need for and safety of new developments e.g. in relation to additives, nanotechnology and GM. Responding to these concerns requires a careful balance on the part of industry and its regulators. Meeting higher demand from fewer resources in future will inevitably require smarter solutions and technology has an enormous contribution to make to this.


The role and effectiveness of Defra

31. As recognised in the Government's "Food Matters" report, a successful food strategy must include affordable access to necessary supplies, fair terms of trade and competition, a proportionate regulatory framework and coherence with wider policies on health and the environment. The challenges of food security extend further into issues of energy and water supply and the impact of climate change on global supply and demand. This agenda - and associated evidence and research needs to be integrated into a coherent cross-government policy framework. FDF notes that Defra has recently been given an enhanced role in relation to food and is awaiting details of what this will mean in practice. However we have some concerns that it appears to be primarily directed to co-ordination of the plethora of existing activities and players rather than the strategic leadership and clear prioritization of sometimes competing policy priorities which is essential.


32. Apart from Defra, FDF deals regularly with BERR, Department of Health, DECC, DfT, DfID, Treasury and Cabinet Office, with FSA and a range of other agencies and public bodies and with devolved administrations and local government structures - often on different aspects of the same issues. FDF engages similarly with a range of EU institutions, to complement the efforts of Defra and others in pursuit of UK interests. FDF would like to see a consistent and coherent view of food policy issues within Government, with a clear focal point for engagement with industry and a shared commitment to proportionate, evidence-based regulation. With so many decisions taken at EU level, particularly in the regulatory area, it is essential that the UK promotes such an approach within the EU, taking account also of the wider world picture.


What criteria can be used to monitor how well the UK is responding to the challenge of increasing food production while ensuring sustainability?


33. A key element of this has to be the efficiency of resource use, in terms of energy, water, carbon and other greenhouse gas emissions. The way food production impacts on the environment and the way it is affected by climate change are other important factors. Absolute levels of output or changes in self-sufficiency ratios are not good indicators of success, as they ignore the externalities which are such an important component of sustainability. The cost of production is also relevant as the UK has to operate in global markets. FDF would be happy to contribute to further thinking on these issues.


January 2009