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Brexit is biggest challenge to supply chain security

The UK’s exit from the EU represents the biggest threats to security of food supply in the next five years, according to businesses.

Of the 100 companies surveyed as part of the Lloyds Bank Food and Drink report 2017, 41% cited Brexit as the number one threat to ingredients or supply chain security, more than double those (20%) who cited volatility in raw material prices.

Elsewhere, almost half (48%) of respondents said the rising cost of labour was the biggest challenge facing the industry over the next five years, with 37% citing regulation and compliance.

To mitigate these challenges, almost two thirds (64%) said they were streamlining processes, up from 37% last year, and 57% are investing in supply chain efficiencies, up from 25% in 2016.

Half of firms (51%) are investing in skills development, up from 34% in 2016, and 49% are restructuring to boost productivity, up from 30%.

Despite fears over security of supply and access to labour, businesses reported feeling optimistic over their future growth prospects. Firms are forecasting growth in turnover of 21% in the next five years, significantly outstripping UK GDP growth forecasts, while 69% are planning to pursue new international customers.

“Despite the short-term challenges brought about by the UK’s exit from the EU, such as the spectre of tariffs on EU trade and reduced access to European labour, the sector is gaining confidence,” said Elena Paitra, managing director, head of food, beverages and tobacco at Lloyds.

“Producers are proactively seeking new opportunities overseas and making steps to solve the productivity puzzle that has stifled UK PLC’s growth.”