UK food wholesalers have written to the Prime Minister to voice concerns around the impact of the Autumn Budget, which they say will “threaten the long-term sustainability” of the supply chain.

Coordinated by the Federation of Wholesale Distributors (FWD) and signed by members, the letter highlighted analysis showing that the National Living Wage increase will add an estimated £110 million in direct wage costs. It also said the increase in employer National Insurance will add additional costs of £31 million a year to “an already embattled sector”.

Food and drink wholesalers said that while they recognise the intention of the Government to spur economic growth, the tax increases announced in the budget will have the opposite effect. FWD argued that the budget will compound spiralling costs and undermine the wholesale sector – at a time when it should be encouraged to play a pivotal role in driving growth.

FWD said that the viability of regional food distributors is now also threatened, while there is additional pressure on the sector’s ability to fulfil public sector contracts to schools, care homes, prisons and hospitals with nutritious food.

Government must differentiate between food wholesalers and online retailers

Also highlighted in the letter were concerns about reforms to business rates, which threaten to plunge hard-working wholesalers into paying a higher multiplier on properties with a rateable value of £500,000. FWD said that while the rationale behind this change may be to tax the warehouses of online giants, it is “essential to ensure there is a way of differentiating them from business-to-business food and drink wholesalers who were not the intended targets of this change” and play a “vital role” in feeding the nation.

Commenting on the letter’s publication, FWD chief executive James Bielby said: “Our members contribute significantly to the UK economy, with annual revenues reaching £36 billion. They also directly employ 60,000 people and add an impressive £3 billion of gross value to the UK economy each year. The scale of our sector’s contribution highlights its significance in powering the Government’s mission to kickstart economic growth – which we wholeheartedly support.

“However, the tax increases announced in the budget will have the opposite effect, compounding spiralling costs and undermining our critical sector. I would welcome the opportunity to meet with the Government to discuss our concerns so that we may identify solutions to mitigate the damaging impact the budget’s measures will have on the critical supply of high-quality food and drink across our country.”

“For the Government to say ‘invest, invest, invest’ whilst costing businesses £25 billion in NI changes is ludicrous.”

Bidcorp UK CEO Andrew Selley said: “Following the announcement of the budget today, it’s hard to have a positive outlook. For the Government to say ‘invest, invest, invest’, whilst costing businesses £25 billion in NI changes is ludicrous.

“Two-thirds of our suppliers and customers are SMEs and many will struggle to survive these tax hikes on top of the minimum wage increase and Employment Rights Bill.”

Bestway Wholesale managing director Dawood Pervez said: “The planned increase in employer National Insurance contributions alongside the National Living Wage increases will wipe off 10% of our profitability, significantly hindering our ability to reinvest in jobs and the wider supply chain. At a time when many wholesalers are already faced with rising prices, these added costs will cause further inflation across the board and will not drive economic growth in our sector or country as a whole.”

Fairway Foodservice CEO Coral Rose said: “As wholesalers in supplying the foodservice sector we are particularly concerned about the impacts on our customers, and the real risk that these measures will lead to reduced spend, less jobs and ultimately fewer businesses and therefore less consumer choice. Wholesalers serving schools, hospitals and care homes will struggle to fulfil these vital public sector catering contracts, impacting hugely on vulnerable people.”