Food manufacturers face tough times warns economist

FOOD manufacturers in the Midlands face a tough period as rising prices force up the cost of their products making them less competitive, a leading economist has warned.

Tom Vosa, chief economist to Yorkshire Bank, said the price rises had come at the worst time for manufacturers – just as they needed to make their goods more competetive.

Speaking at a food manufacturing conference in Coventry, held at Yorkshire Bank’s Financial Solutions Centre, Mr Vosa said the economic recovery remained fragile and increases in raw materials – such as food – together with energy thereatened to undermine growth.

The comments echo those made by Mr Vosa during an economic lunch in Birmingham, organised by Yorkshire Bank Corporate and Structured Finance and TheBusinessDesk.com, earlier this month.

On that occasion Mr Vosa said: “There have been a number of shocks when we least expect them and food price rises have been one of those.

“Unfortunately, with meat and livestock prices rising then (manufactured) food costs are bound to rise with them.”

The escalating prices could also add to inflationary pressures, forcing the Bank of England to raise interest rates, he added, although this would not be until later in the year.

Speaking after the event in Coventry, Brian Colquhoun, regional director for Yorkshire Bank, said Mr Vosa’s views had given food for thought to everyone attending the conference.

“Tom didn’t shy away from underlining the difficulties the industry is currently facing and will continue to have to contend with as food and fuel prices continue on an upward spiral,” he said.

“He said our economic recovery remains fragile as increases in raw materials and energy prices rise.

“There is a worry that there will be a shortage in food supplies across the world and the increase in VAT to 20% hasn’t helped the food manufacturing industry in the UK.”

Mr Vosa said unpredictable weather was another factor which had to be considered when assessing the demand for fresh food as frost and freezing temperatures could disrupt supply.

“Overall Tom believes the inflation of food prices will remain volatile in the short-term particularly because of the cost of fuel driving up the cost of delivering items to their destinations,” added Mr Colquhoun.