Costs will increase again, Food and Drink Federation warned on Friday (11), stating that economy may have bounced back swiftly from the blow of the Omicron variant but outlook for growth is darkening due to Russia-Ukraine war.
Stating that January’s GDP rose by 0.8 percent on the month, after shrinking by 0.2 percent in December and all sectors showed growth, FDF stated that current economic conditions are very fluid, characterised by heightened market volatility and extraordinary uncertainty.
“It’s too early to put a number on global economic losses from the conflict but there’s no doubt the war will deliver a severe economic blow, fuelling inflation and further disrupting supply chains and logistics,” FDF said.
The federation added that increasing gas and oil prices will also impact UK food prices.
“The food and drink industry is not insulated from the shock. Gas and oil price rises mean production costs will increase yet again. These fresh rises come at a time when a year of increasing cost pressures have pushed profit margins in the sector to razor-thin levels.
“Prices of oil and gas shot up to historical records this week as the world is scrambling to decouple itself from Russia. There are no short-term solutions when it comes to gas and only a partial replacement of Russian oil output is possible, provided OPEC agree to it. This means food and drink businesses will be hit with substantial higher operating costs.”
The fact that both Ukraine and Russia are key suppliers is also going to drive up the food prices.
“Ukraine is the UK’s single biggest source of imported sunflower oil, rapeseed oil and maize. Ukraine and Russia are by a distance the two largest producers and exporters of sunflower oil, accounting for nearly 60 percent of global production and 75 percent of exports.
“Wheat prices in the UK will certainly increase, even if only 3 percent of imported wheat comes from Ukraine and Russia. But Ukraine and Russia account for nearly 30 percent of global exports, less wheat available for the world will push prices of wheat up everywhere.”
