Further warnings on food prices as pound weakens

Simon Howie is latest figure to highlight impact of currency fall

SCOTTISH food manufacturer Simon Howie has said he is fighting hard to keep the prices of his products down following the collapse in sterling, but warned that “shortterm pain” was inevitable.

The comments come as Tesco chairman John Allan said food prices are “very likely” to rise because of the Brexit vote.

Speaking on Radio 4’s Today programme, Mr Allan said price rises would depend on where the pound settles, but having plummeted 14 per cent against the euro and 17.5 per cent against the dollar since the June 23 vote, he added: “It is likely there will be some price increases going forward – I think is very likely.

“At the moment we have got virtually nil inflation. Inflation, I think, could nudge up to two per cent or three per cent, food prices would be a part of that,” he said.

Food deflation has had a major impact on the fortunes of the UK’s supermarkets as consumer enjoy cheaper prices, but the Brexit vote is likely to change that.

A high-profile dispute between Tesco and Unilever last week highlighted that issues over the prices of everyday goods “have got real”, according to Mr Howie.

Mr Howie’s business isn’t directly affected by the sterling plunge as it does not import meat, but he said competitors who do would seek to use more domestic produce, causing supply and demand issues.

“Inevitably, we will have to take short-term pain with that,” he said. “We’ve got long-term relationships with our customers but simply sticking our hand in the air and asking for more money won’t work. We’ve got to absorb it, but ultimately it’s going to impact the price of products on the shelves.”

Last year the company made profits of £2.6 million on turnover of £14.7m, which was up five per cent. Mr Howie added the company was “doing our best to fight off” any potential price rises by reducing costs through improved efficiencies and investment in sustainable energy.

He added: “We don’t have the flexibility to say to our suppliers – farmers and abattoirs – that we will not pay the increases; they’ll tell us the price, that’s the rules of engagement. We don’t have that with our customers.”

In the last month a number of companies have warned of the impact the Brexit vote will have on their business, with staff retention of another issue.

Mr Allan warned that suppliers are “very concerned” about restrictions on migrant labour after Brexit, as he insisted Britain could not just take highly skilled immigrants.

And earlier this month, Jim Walker of Walkers Shortbread said some of the overseas workers his family’s company employs could leave the country because of either changes to their residential status or as a result of a backlash against foreign nationals working in the UK.

The wide-ranging impact of sterling’s instability following the vote has also been illustrated by an announcement on Monday from Microsoft that it was increasing the price of its enterprise cloud products, such as Office 365, by 22 per cent, directly as a result of sterling’s collapse.

And businessmen such as Mr Howie, who has interests in a number of sectors, could find themselves facing challenges on multiple fronts. He is also behind Shore Laminates, which supplies a range of flooring. Mr Howie said the business was performing well, but was also facing price increases as a result of importing from Brazil and the far-east. SCOTTISH Enterprise is to make £2.75 million of funding available to small and medium-sized enterprises via the peer-to-peer lending platform LendingCrowd.

LendingCrowd chief executive Stuart Lunn said the business had approached Scottish Enterprise after the Scottish Government last year published a report highlighting the difficulty small and medium sized enterprises (SME) have in accessing funding in the £150,000 and below bracket.

“We proposed to Scottish Enterprise we felt that is exactly where we sit – it’s a space we’re engaged with and understand,” Mr Lunn said.

“This will help Scottish Enterprise with its aim of closing that gap and it will enable us to build our client base and lend out more. We hope the whole project will become self-fulfilling.”

Scottish Enterprise’s investment arm, the Scottish Investment Bank (SIB), is acting like any other investor on LendingCrowd’s site, with its cash being distributed across a portfolio of loans and earning a commercial rate of interest.

The average size of loan made via LendingCrowd is £75,000 but SIB will not give the full amount being sought by any of the SMEs on the platform. It expects to lend between £5,000 and £250,000 on a case-by-case basis.

“The money will be used in such a way they are participating in loans rather than fully funding them – they are looking to leverage the money they have with other people’s money,” Mr Lunn said.

“The more money that comes across the platform the better because we can scale up.”

From SIB’s point of view the deal will allow it to invest in a broad range of businesses that LendingCrowd has done credit checks on. SIB head Kerry Sharp added the deal will “increase competition in the marketplace and provide greater diversity”.