The latest Food and Drink Federation (FDF) Business Confidence Survey shows that net business confidence fell by 55% in Q3 2021, dropping to -51% due to the ongoing supply chain issues.

Severe supply chain disruption was the biggest cause for concern, particularly the transportation of goods with 93% experiencing delayed or missed outbound deliveries and 75% reporting delayed or missed inbound deliveries.

According to the survey, labour supply issues are not likely to resolve soon. The report found that half of respondents are expecting the permanent supply to decrease and 54% expect the temporary supply to decrease in Q4 2021. Labour shortages remain across a range of roles in the food supply chain. The most common shortages were HGV drivers, temporary agency workers and process, plant and machine operatives.

The majority (61%) of respondents also reported that their product margins are being squeezed, driven by wide-ranging supply chain disruption and rising production costs. An overwhelming majority of businesses anticipate continued price rises, with 97% of respondents expecting consumer price inflation to increase in Q4 2021.

Key findings by the survey include:

• 44% noted decreased availability of warehousing
• 68% experienced a shortage of HGV drivers
• 68% noticed a shortage of process, plant and machine operatives
• 53% experienced reduced output/closure of production lines
• 79% noted increased production costs.

Confidence declines

Ian Wright CBE, chief executive at the FDF, said that the results “demonstrate that confidence levels across our sector have been hit by continuing supply chain disruption.” He added: “On top of this, the confection of increasing uncertainty about Omicron, the UK’s changing trading relationships, and the re-ignition of inflation, all threaten to undermine resilience across the sector. Many businesses now expect disruption and reduced service levels to continue right through 2022 and into 2023.”

Business confidence declined significantly in Q3 2021, with net confidence returning to negative after the positive outlook in Q2 2021. The report shows that businesses felt pessimistic about the impact of ongoing labour shortages, rising consumer price inflation and the tightening of product margins.