Groceries Supply Code of Practice

David Jones Excerpts

Monday 22nd January 2024 Westminster Hall

[Mr David Jones (Clwyd West) (Con)]

It is an unalloyed delight to serve under your chairmanship, Mrs Murray. I congratulate the hon. Member for Neath (Christina Rees) on her excellent introduction to this important debate. The large number of signatures to the e-petition indicates the huge concern in the agriculture sector about the supply chain practices of some of the larger supermarkets and their impact on small-scale farmers and growers. The petition has so far attracted over 112,000 signatures, and special mention should be made of Guy Singh-Watson of Riverford Organic Farmers, who initiated it.

As the hon. Lady said, small suppliers are the backbone of the food supply industry in this country—many of my constituents fall into that category. Not only do they help to feed us; they look after our countryside and make sure that our environment is clean. Without them, our rural landscapes would look very different.

At the other, consumer-facing end of the food supply chain are the large supermarkets. Around 95% of the food consumed in this country is sold by just 12 retailers, many of which are multibillion-pound listed companies. The disparity in bargaining strength between those companies and the small family firms that I mentioned is obvious. The supermarkets have the power to drive hard bargains with their suppliers, most of whom are not farmers but commercial intermediaries. Inevitably, the pressure that the supermarkets exert down the supply chain is felt most keenly by the small farmers and growers at the beginning of that chain. According to the agricultural charity Sustain, farmers often receive less than a penny of the profit generated by their produce, with farm businesses increasingly relying on subsidies to break even, and 40% of farms earning less than £25,000 annually.

The impact of that behaviour is felt throughout the supply chain. My constituents Liz Kameen and her husband trade as Vale Grocer in Prion, Denbeigh. They supply vegetable boxes in the locality. They are small-scale growers who have chosen not to try to sell to supermarkets directly. Instead, they have created their own customer base, which they supply. She tells me:

“As we supplement produce we grow with produce from organic farms around the UK, we are very concerned about the impact of supermarket behaviour on those producers.

If we lose any of our suppliers we cannot continue offering the amazing veg and fruit we do currently.”

The pressures inherent in the food supply chain have long been recognised. They led to the creation of the groceries supply code of practice, which, as we have heard, is enforced by the Groceries Code Adjudicator. Although the code is welcome so far as it goes, it does not go far enough to afford adequate—or, indeed, any—protection to smaller famers. That is because it only governs the relationship between the supermarkets and their contractual suppliers, who are very rarely the farmers and growers. The GCA is therefore unable to intervene where the practices of supermarkets cause hardship to those small family firms.

In September last year, the GCA published a report on his deep-dive survey of the conduct of supermarkets, in which he noted complaints that some supermarkets had chosen to conduct “warfare” with suppliers and had displayed a lack of good faith in negotiations. Such behaviour ultimately has a heavy impact on small producers.

The campaign launched by Mr Singh-Watson calls for new powers for the adjudicator that would enable him to take a more effective and, in appropriate circumstances, punitive stance against unfair practices in the supply chain. It further calls for the code of practice to be revised, embedding the principles that retailers must buy what they agreed to buy, pay what they agreed to pay, and pay on time without exception. Those are entirely fair and reasonable requests; decent retailers should be only too happy for the code to be amended in that way, because that is the way they should be behaving anyway. However, that is not always how they behave. Riverford Organic Farmers cites the example of a potato farmer who was told that his potatoes were no longer wanted by the supermarket he was supplying. He was left with 60 tonnes of potatoes and no customer. Such practices will naturally have a devastating impact on farmers.

Research conducted by Riverford indicates that 49% of farmers fear that they will go out of business in the next year; 61% said that supply chain unfairness was adversely affecting their mental health. It is entirely unacceptable that people with a vital role in the nation’s food supply should be driven to feel this way. Riverford, Sustain and the other campaigners are right: the code of practice needs to be brought up to date and up to standard.

I know the Government recognise the unfairness in the food supply chain. The Agriculture Act 2020 enables the Department for Environment, Food and Rural Affairs to introduce statutory codes of practice, but it has been questioned whether it makes sense for two regimes to co-exist, especially if they will be enforced by two different regulators. The answer should be to amend the code of practice, as called for in the petition. The Government are consulting on contractual relationships in the fresh produce industry, and I understand that that consultation will close on 22 February. I very much hope that its outcome, informed by this debate, will be that those amendments will be made as soon as possible to provide fairness for the United Kingdom’s farmers and growers.

--- Later in debate ---

[Ben Lake (Ceredigion) (PC)]

It is a pleasure to serve under your chairmanship, Mrs Murray. I thank the hon. Member for Neath (Christina Rees) for securing this important debate and the petitioners for bringing it to the attention of the House. It is also a pleasure to follow my friend, the hon. Member for Totnes (Anthony Mangnall). I was struck by the constructive point he made about how, in the spirit of cross-party consensus and co-operation, we can address many of the concerns in rapid order. It is in that vein that I make my own remarks this afternoon.

The strengthening and broadening of the scope of the groceries supply code of practice is necessary; as has been rehearsed already by those far more eloquent than I, it is also very timely. It is important to emphasise at the outset that our farmers, including those in Ceredigion, find themselves in a situation of severe uncertainty. We have already heard quite a bit about the impact of inflation; I do not need to rehearse the statistics, other than to say that the spikes in input and production costs have been severe.

Although inflation in terms of many of those input costs has come down, they are not reducing—there has not been deflation. Many of our farmers are still struggling with heightened input costs. This is also a time when unfair and quite extraordinary trading practices have been exercised by too many of the large grocery industry businesses. As the hon. Member for North Shropshire (Helen Morgan) mentioned, there has been a pincer effect on many of our farmers, who find themselves vulnerable. It is timely that we should be debating some of these changes this afternoon.

Farmers across the United Kingdom, and specifically in my own constituency of Ceredigion, value certainty. The businesses are built on long-term models, due to the investments required in agriculture and the growing and production cycles. So, yes, as we have heard, farmers are particularly vulnerable to inflation spikes but also to the extraordinary and unfair trading practices that arise from the severe power imbalance that many Members have described in detail this afternoon.

The fact is that the buying power of the groceries sector affords it a significant ability to apply short-term pressures on suppliers and producers, without much understanding of the long-term consequences. We have seen that power dynamic play out to disastrous effect over the past 18 to 24 months, particularly in the horticultural and poultry sectors. Other sectors also complain of severe practices being aggressively applied by some of the larger companies. It is quite appalling to hear about people being told at the very last moment that they are no required to produce as much, and the hon. Member for Neath mentioned lettuces. Others are finding that their contracts or verbal agreements are being changed with little notice. Indeed, some growers find out the price they will be paid for their produce only when they come to harvest. For an industry that is so dependent on certainty and long-term planning, these practices are simply disastrous, so it is right that we debate ways to address them and to restore some balance of power across the supply chain.

The right hon. Member for, I believe, Vale of Clwyd—

[Mr David Jones]

Clwyd West.