Why NLW and NI changes are the biggest current threat to growers

The government stated in its manifesto that food security is national security and in the months since the election this has been repeated on numerous occasions by the secretary of state and ministers.

But the level of concern, frustration, and anger from the horticulture sector towards the government’s first Budget has all but eroded any optimism it may have drawn from that sentiment.

The changes announced to inheritance tax for agriculture is incredibly destructive for the industry, but the immediate threat to growers is the staggering increases in the National Living Wage (NLW) and National Insurance (NI), in addition to the reforms in the Employment Rights Bill. 

For British growers, workforce costs account for between 35 to 70 per cent of overall production costs. Our early estimations are that the changes to NLW and employer NI contribution amendments will add a further 10 per cent inflation to grower businesses’ labour costs. 

I’ve recently had conversations with growers who say the rise in wages, combined with the NI changes and employment reforms, will add many thousands of pounds – in some cases millions – to the cost of employment.

Investment plans under threat

To accommodate NLW increases, the ‘differentials’ in wages further up the pay scale is getting squeezed, which could demotivate more skilled workers. And for a budget that was meant to be all about growth, many growers are suggesting investment plans may be axed and redundancies considered.

These are costs that many growers cannot absorb after four years of inflationary production costs hitting profitable businesses’ bottom lines hard. In recent years, we saw orchards being grubbed, empty shelves due to unplanted crops and the unfortunate collapse of some well-known businesses.

Producers cannot face the challenge alone as we’re already stretched to breaking point after years of inflationary costs. We echo the BRC, CBI and the Federation of Small Business’s recent warnings to the Treasury – among many other named retailers across the economy – that these announcements, rather than support growth across our sector, will hold it back.

Promar reported in 2024 that horticultural cost inflation increased by 39 per cent in the last two years, with labour accounting for 24 per cent of that. The soft-fruit and top-fruit sectors further reported that farmgate returns only increased by 8 per cent.

Self-sufficiency eroded

All this comes at a time when we should be growing the sector earmarked for growth. Instead, we’ve seen self-sufficiency in UK fresh produce production falling with British vegetables supplying only 52 per cent of the market demand, and fruit 15 per cent.

Growers want to produce more British food, but without a fair return from the market, and support from the supply chain, I fear this downward trajectory will only escalate further. This is a disaster not just for the horticulture sector but for the health and wellbeing of our nation.

This risk could be adverted, but it needs action. Growers need to be confident the increased cost burden on their businesses can be shared across the supply chain, if we are serious about maintaining, let alone growing, our domestic food production. It is critical the government understands the impact of introducing so much inflationary pressure on supply chains all at once and takes steps to mitigate, such as advancing its work on fairness in the supply chain as a priority.

As primary producers we recognise the Budget changes are not unique to growers; all businesses across the economy are now under the same pressure. Our nationwide network of horticultural businesses is integral to achieving food security – well cited by the government as national security – and the Budget has initiated inflationary pressures that threatens the future of this vital supply chain.