Enterprise Bill

Written evidence submitted by the Food and Drink Federation (FDF) (ENT 79)

1. The Food and Drink Federation (FDF) is the trade association representing the food and non-alcoholic drink manufacturing industry, the largest manufacturing sector in the UK. Our industry has a Gross Value Added (GVA) of £21.5bn and a turnover of £81.8bn which accounts for 16 per cent of the total manufacturing sector by turnover employing around 400,000 people.

2. FDF’s evidence in response to this consultation on the Enterprise Bill focusses on two key areas for our members:

a. Establishing a Small Business Commissioner, to assist in payment disputes and signpost advice services for small businesses; and

b. Protecting the term ‘apprenticeship’.

Small Business Commissioner

3. FDF supports Government’s aim of encouraging prompt payment of invoices. The majority of UK businesses pay suppliers in accordance with agreed payment terms and we believe that Government action should therefore be proportionate and targeted at companies that are late payers and at ensuring small and medium-sized enterprises (SMEs) are paid according to agreed terms that are fair and reasonable.

4. We are pleased to see that latest Bacs [1] data indicates the situation faced by SMEs around late payment of invoices is improving. The total value of late payment debt to SMEs fell nearly a third between July 2014 and July 2015, however with £26.8bn still owed it is clear late payment of invoices represents a huge challenge for UK small businesses.

5. In our view, the interest of SMEs is paramount. That is why FDF welcomes plans to introduce an independent Small Business Commissioner (SBC) acting as an arbiter and advocate for UK small businesses and as a champion of good practice. The SBC should act as a one-stop shop with a clear emphasis on guiding and informing small businesses and ensuring awareness of best practice when entering into commercial relationships with larger businesses. It should engage from the outset with leading business consultants as a route for promoting best practice.

6. The UK needs thriving and collaborative supply chains so that companies can effectively invest in their own growth. We believe the SBC can play a positive role offering a centralised service that allows small businesses to raise concerns and resolve issues before commercial relationships are damaged. Business relationships and supply chains fail if they become confrontational, so there is a clear function for the SBC in promoting good practice in contract negotiations.

7. The majority of UK businesses pay suppliers in accordance with agreed payment terms. Actions to address poor payment practices should therefore be proportionate and targeted towards companies that are late payers. They should also avoid instilling a climate of fear that discourages both small businesses engaging with larger businesses as well as making the UK a less attractive place for larger companies to operate and invest.

8. It is essential that the SBC distinguishes between payment terms and late payment. Suppliers and customers need to have continued flexibility when negotiating contract terms given the diversity and complexity that exists in supply chains, particularly for food and drink. The SBC must encourage candid payment negotiations where agreed terms are honoured in full. Having confidence in the terms decided and cultivating strong supplier relationships will help move the business community towards a culture of prompt payment.

9. Providing confidential general advice to small businesses is potentially valuable, but the SBC needs to be sufficiently resourced with a clear focus to deal with multiple inquiries and complaints swiftly. The SBC should not create additional complexity for businesses and consideration must be given for how in-house mediation services will avoid duplication and be cost-effective for businesses.

10. Greater clarity is needed on how the SBC would operate in relation to existing dispute resolution mechanisms. For example, under which circumstances would the Commissioner offer support that is not already available from the Groceries Code Adjudicator (GCA) or other existing mechanisms. Attention is required to the payment terms and practices identified as potential causes of disputes, including circumstances under which these could be justified.

11. Clarity is also required around how the SBC will operate in relation to the recently revised, industry-led Prompt Payment Code (PPC) which Government has said should set the gold standard in terms of payment policies and best practice. We believe that the PPC and SBC can work together towards the common aim of ensuring fair and reasonable payment terms for SMEs and fostering growth for UK business.

Protecting the term ‘apprenticeship’

12. FDF and our members support the Government’s ambition to create 3 million new apprenticeships by 2020 and to treble the number of apprenticeships in food, farming and agri-tech. Our industry is committed to increasing the pathways into food and drink manufacturing, including apprenticeships. In December 2016, FDF announced a new apprenticeships pledge which will see the total apprenticeship workforce in the sector increase from 1 per cent to 3 per cent against a 2013/14 baseline. The target built on an existing pledge to increase the number of higher-level apprenticeships by 20 per cent by 20 20 and other sector-wide initiatives to address a looming skills shortage.

13. FDF has supported the National Skills Academy for food and drink and industry partners create five ground-breaking new Apprenticeship trailblazer standards for key occupations in our sector including Food and Drink Maintenance Engineer, Food and Drink Process Operator, Food and Drink Advanced Process Operator, Baker and Food Technologist which are due to start taking on students in 2016.

14. Although the industry has a proven track record in providing high quality apprenticeships and a desire to create more, the Government targets are challenging due to the low base our industry is starting from. There are several reasons for the current low numbers of apprentices in the sector. Firstly, the paternalistic nature of the industry has created a loyal and long serving workforce. According to UKCES, 36 per cent of the workforce is due to retire between 2012 and 2022. Retirement and people leaving the industry means that 109,000 jobs will need to be filled in food and (non-alcoholic) drink manufacturing between 2012 and 2022.

15. Secondly, an overreliance on graduates due to an emphasis on this pathway into jobs by previous administrations means that many companies in our sector became dependent on this route.

16. The final reason for the low numbers of apprentices in food and drink manufacturing comes from the difficulty of building up a critical mass in any one geographic area. Due to the spread of the industry across the UK it can be difficult for companies beginning the apprenticeship journey to build up large numbers of apprentices needing food and drink specific training in any one area of the UK. This meant that companies in the past were forced by training providers to send apprentices on more generalist, non-food and drink specific qualification routes as it was too costly to run food and drink specific courses. These apprentices would complete their training without the required expertise, meaning further training was needed at the companies’ expense and food and drink manufacturers lost confidence in these qualifications. The industry has since become one of the pilot Trailblazer sectors, pioneering this industry-led form of qualification development and we remain committed to this work to create quality apprenticeship standards for our industry.

17. Skills issues, such as an ageing workforce, talent shortages, technical and scientific skills gaps and low apprentice numbers, risk undermining future productivity improvements in the food and drink manufacturing sector. Therefore FDF welcomes measures to strengthen apprenticeships and increase the number of pathways into our industry. Whilst, protecting the term apprenticeship, the Government must clarify how new apprenticeship funding, under the apprenticeship levy will work in practice. Businesses are keen to ensure that apprenticeship employment and training costs demonstrate value and deliver a return on investment that supports the long term sustainability of the business. The focus on quantity should not overlook the importance of quality of provision. Whilst FDF supports schemes that encourage companies to put more emphasis on hiring new apprentices, we are concerned that the expectations this levy places on businesses are too high.

The UK Food and Drink Manufacturing Industry

The Food and Drink Federation (FDF) is the voice of the UK food and drink manufacturing industry, the largest manufacturing sector in the country. The industry has a turnover of £83.7bn, which is 16 per cent of total manufacturing turnover, and Gross Value Added (GVA) of £21.9bn. The industry employs around 400,000 people. Exports of food and non-alcoholic drink have doubled in the last ten years, amounting to a worth of £12.8bn in 2014.

The following Associations actively work with the Food and Drink Federation:

ABIM Association of Bakery Ingredient Manufacturers

ACFM Association of Cereal Food Manufacturers

BCA British Coffee Association

BOBMA British Oats and Barley Millers Association

BSIA British Starch Industry Association

BSNA British Specialist Nutrition Association

CIMA Cereal Ingredient Manufacturers’ Association

EMMA European Malt Product Manufacturers’ Association

FCPPA Frozen and Chilled Potato Processors Association

FOB Federation of Bakers

PPA Potato Processors Association

SMA Salt Association

SN Sugar Nutrition UK

SNACMA Snack, Nut and Crisp Manufacturers’ Association

SPA Soya Protein Association

SSA Seasoning and Spice Association

UKAMBY UK Association of Manufacturers of Bakers’ Yeast

UKTIA United Kingdom Tea & Infusions Association Ltd

FDF also runs specialist sector groups for members:

Biscuit, Cake, Chocolate and Confectionery Group (BCCC)

Frozen Food Group

Ice Cream Committee

Meat Group

Organic Group

Seafood Committee

February 2016

 

Prepared 25th February 2016