Farming opinion: Counting the cost of the Living Wage

NFU County Advisor Niamh Kilgallen.

NFU County Advisor Niamh Kilgallen. - Credit: Gregg Brown

Chancellor George Osborne has laid down the gauntlet for British horticultural businesses. The introduction of a National Living Wage (NLW), which came as a surprise announcement in the Budget, will present a host of financial issues for growers and raise concerns about the future of some businesses, writes National Farmers’ Union East Anglia adviser Niamh Kilgallen.

It’s important to state that the NFU supports the principal of a living wage and a fair day’s pay for a fair day’s work. The agricultural and horticultural industry is clear in its ambition to attract the best workers to its ranks. We can only do this by offering good wages and rewarding career prospects to our employees.

Our concern is the way this initiative is being implemented, which could result in many of our horticultural businesses becoming financially unsustainable within a few years of its introduction.

It seems that the consequences of NLW have been ill- considered and there is no sound plan for mitigating the financial burden on businesses to allow them to cope with the extra cost. This is not just about the lowest paid workers. Employers will have to raise salaries across the board to keep pay differentials in place. This is an issue that really matters in our region. There are 35,000 hectares of horticultural crops across East Anglia, worth £540million to the regional economy in 2014. In Suffolk and Essex alone growers produce almost 10% of England’s field vegetables and 7% of its small fruit, such as strawberries.

Our region also includes about 300 acres of specialist glasshouses in the Lea Valley, where growers produce 80m cucumbers along with 50m sweet peppers and other salad crops. Many horticultural crops, such as soft fruit, tree fruit, flowers, leafy salads and vegetables, are heavily reliant on hand harvesting and so these crops have a high requirement for seasonal labour.

While there are opportunities for mechanisation within some sectors, the ability to invest is only possible if businesses are profitable. A report by Andersons Farm Business Consultants forecast the additional cost of the NLW over the next five years is equivalent to up to 158% of current business profit for some farmers and growers. Our members will need to boost income but they operate to tight margins and options are limited. It will be extremely difficult to pass on higher costs further up the horticultural supply chain, which is also dealing with the impact of the NLW.

There is still time for the Government to mitigate the impact. The NFU is asking for the requirement for employers’ National Insurance contributions for seasonal workers to be removed, along with pension auto-enrolment for seasonal workers. Many of these pensions will never be claimed but will still involve significant costs to establish and administer.

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We are also asking for the accommodation offset (a notional amount that contributes towards the minimum wage) to apply to the NLW and for its level to be increased.

Access to seasonal labour is often a challenge for our growers, so we would like to see the reintroduction of a temporary visa scheme for agricultural workers, and a postponement in the schedule for the introduction of the NLW.

Our growers produce top quality fruit, vegetables and plants and have a fantastic track record of growth and innovation. But this rapid inflation in wage costs could have a permanent, damaging impact.