EU food companies face closure as they buckle under strain of energy crisis
EU agri-food companies are struggling to maintain operations amid mounting energy prices, with some faced with pausing production, laying off staff or going out of business altogether, according to a joint statement issued by the EU’s major food sector associations.
Squeezed between mounting prices for natural gas, fertilisers, electricity and packaging while facing one of the worst droughts in recent times, the EU agrifood sector’s production costs have soared over the past year.
The mounting prices have meant some EU food and drink companies have started reducing operations during energy peak times, with warnings that some may soon shut down production altogether, according to a joint statement by FoodDrinkEurope, EU farmers’ association COPA-COGECA and the EU’s Primary Food Processors association, released on Thursday (8 September).
“It’s admittedly still early days for full closure, but we hear anecdotally that companies – where possible – are shutting down operations during energy peak times,” Dirk Jacobs, director general of FoodDrinkEurope, told EURACTIV.
First in the firing line are SMEs, specifically those in more energy-intensive sectors such as bakery, vegetable processing and dairy, he explained.
“But as long as the uncertainty remains, there will be more pressure on companies to either lay off staff, reduce operations or – worst case – stop business completely,” Jacobs warned, stressing that “no energy means no food”.
According to the association, as many as 4 out of 10 food companies in Belgium risk going bankrupt in the event of another economic blow.
“The situation is very fragile for our sector – it’s five to midnight,” he added.
The associations warn that this could have knock-on effects on the whole agrifood ecosystem, given the interlinkages within the chain, with long-lasting effects felt into 2023.
Ahead of the Extraordinary Energy Council on Friday (9 September), as well as European Commission President Ursula von der Leyen’s annual State of the Union speech next week, the associations urged decision makers to place food issues front and centre of the discussions.
Concretely, the joint statement calls on the Commission to support member states to intervene to bring energy prices down and increase liquidity in energy markets, stressing the need to diversify energy supply, boost sustainable energy generation, and support the competitiveness of operators.
Moreover, the organisations call for more EU oversight of member state gas rationing plans to make sure they prioritise the agri-food sector, as well as a further revision of the Temporary Crisis Framework to ensure that it can be used by member states and businesses.
“We hope that energy ministers reflect on the impact on the agri-food sector at their meeting and that President von der Leyen will acknowledge the vital importance of the agri-food sector at her State of the Union address,” the statement reads.
EU chief lays out five measures to tackle energy crisis
Brussels outlined on Wednesday (7 September) five proposals to tackle the high energy prices gripping Europe, including a mandatory target for reducing electricity use, capping the revenues of energy firms, and recycling the money raised to help vulnerable households.
[Edited by Nathalie Weatherald]