British food makers are facing a Brexit profits squeeze as the slumping pounds boosts their costs, according to global credit rating agency S&P.
The group estimated the pound’s fall since the EU referendum had pushed up food makers’ raw material costs by between 5 and 10 per cent, with smaller food companies facing the biggest risks.
‘Smaller private-label food makers that generate their revenue in pounds face rising production costs because they source more than half of their raw materials in non-sterling currencies,’ said S&P analyst Gerhard Wortche.
The boss of chocolate group Mars warned that failure to reach a trade deal with Europe after Brexit could see tariffs of up to 30 per cent
S&P cited three UK companies – Young’s Seafood, fresh food maker Bakkavor and Boparan, the owner of Fox’s Biscuits and Baxters – as firms that had seen profit margins squeezed.
It added that food makers had largely been unable to pass on higher costs to supermarkets because prices were fixed up to a year in advance, but that they could be passed on in the second half of 2017.
The warning came as the pound fell against the dollar late last week as expectations grew that interest rates are set to rise in the US.
It also followed the latest warning from a global food group over the risks to jobs and prices from a cliff-edge Brexit.
The boss of chocolate group Mars warned that failure to reach a trade deal with Europe after Brexit could see tariffs of up to 30 per cent imposed on some in the confectionery industry, leading to price rises for the iconic Mars bar and other British favourites.
Fiona Dawson, global president of Mars, told the American Chamber of Commerce to the EU that trade in Europe had benefited from ‘the absence of hard borders’.
‘The return of barriers would create higher costs which would threaten that supply chain and the jobs that come with it.’