Accredited official statistics

Total Factor Productivity of the United Kingdom Food Chain 2022 – final release

Updated 25 July 2024

Key messages

• In 2022 the productivity of the food chain increased by 2.0 per cent, while the productivity of the wider economy increased by 2.6 per cent. In the 10 years prior to 2022, the average annual growth rate of the food chain was 0.8 per cent, while the wider economy’s average annual growth rate was 0.4 per cent.

• In 2022 three of the four food chain sectors had a higher productivity than in 2021. Manufacturing increased by 2.7 per cent, wholesale increased by 2.4 per cent, retail decreased by 0.6 per cent and catering increased by 3.3 per cent. The latter demonstrated a full recovery from the conditions faced during the height of the pandemic.

• In 2022, the total value of Gross Value Added for the food chain was £132.9 billion. Catering was the largest contributor with £43.4 billion while wholesaling was the smallest with £16.6 billion.

Overview

The total factor productivity (TFP) of the United Kingdom food chain, measuring the amount of input required to produce one unit of output, is an indicator of the efficiency and competitiveness of the food industry within the United Kingdom . An increase in TFP indicates the industry is more efficiently using its inputs to generate outputs. If TFP in the UK food chain increases faster than other countries, this indicates that the industry is improving its international competitiveness.

Factors influencing total factor productivity

In economic theory, total factor productivity (TFP), also called multi-factor productivity, measures the combined productivity of all factors of production used to produce the output.

Increases in total factor productivity reflect a more efficient use of inputs, and TFP is often taken as a measure of long-term technological change or dynamism brought about by such factors as technical innovation. This indicator does not explicitly capture these factors but attempts to produce a more sophisticated measure than simple labour productivity estimates. Explaining year-to-year changes in TFP is not straightforward as there is no single factor that can explain the changes.

There are several macro and micro economic factors, which together can help to understand patterns and trends in TFP. These include technological advances (i.e. innovation that allows firms to use labour and capital more or less efficiently), macroeconomic factors (such as economic stability, levels of taxation, fiscal and monetary policies), human capital (i.e. labour skills)and institutions. Please see the Background Notes section for further details.

The food chain plays a significant part in our economy, accounting for about 8 per cent of the Gross Value Added of the UK non-financial business economy (see Glossary). Four sectors make up the food chain: food and drink manufacture, food and drink wholesale, food and drink retail and non-residential food and drink catering. Both alcoholic and non-alcoholic drinks are included in food. Total factor productivity measures the combined productivity of all factors of production used to produce the output. For example, TFP increases if the volume or value of outputs increases while the volume or value of inputs stays the same. Similarly, TFP increases if the volume of inputs decreases while the volume of outputs stays the same. Although there is a practical limit on how much food people want to buy, the volume or value of output can increase due to increases in the quality of products and by increases in export volumes or values.

Figure 2.1. Gross value added of the UK food chain 2022

2022	£ billion
Food and Drink Manufacturing	35.1
Food and Drink Wholesale	16.6
Food and Drink Retail	37.7
Non-Residential Catering	43.4

Figure 2.1 description: Figure 2.1 shows the gross value added of the UK food chain in 2022. In 2022, the value of Gross Value Added for the four sectors of the food chain was £132.8 billion. Catering was the largest contributor with £43.4 billion, while wholesale was the smallest with £16.6 billion. This estimate for 2022 is final as the underlying data used are final estimates. See the Users and potential uses of this data section for more details. The background data and charts in this release can be downloaded.

Sector trends

Figure 3.1. Total factor productivity trends within the UK food chain sectors 2000 to 2022

Figure 3.1 description: Figure 3.1 shows the total factor productivity trends within the UK food chain sectors, 2000 to 2022.

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• Since 2014 manufacturing productivity had increased steadily, decreasing in 2020 but increasing again in 2021. In 2017 wholesale productivity began to overtake it and is now at a higher level.
• Retail and catering had demonstrated a flatter trend up until 2020, retail then increasing in both 2020 and 2021 before falling slightly in 2022, catering decreasing in 2020 before increasing again in 2021 and continuing this increase in 2022.
• Catering increased by 3.3 per cent, the most in 2022, followed by manufacturing which increased by 2.7 per cent, while retail decreased by 0.6 per cent and wholesale increased by 2.4 per cent.
  

Sector analysis

Figure 4.1. Manufacturing

Figure 4.1 description: Figure 4.1 shows the inputs, outputs and productivity data for the manufacturing sector, 2000 to 2022.

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• In 2022, total factor productivity in food and drink manufacturing increased by 2.7 per cent over the last 10 years it increased by 0.6 per cent.
• In 2022 inputs decreased by 0.2 per cent, while outputs increased by 2.4 per cent, resulting in the productivity increase.
• The increasing trends in index value are in line with the upward trend observed since 2014, with the exception of a clear drop in 2020, reflecting the effects of the Covid-19 pandemic.
• Labour input has increased by 0.7 per cent since 2021. In the last 10 years the average annual labour input increased by 1 per cent.
• In 2022, food and drink manufacturing contributed 26 per cent to Gross Value Added of the food chain beyond the farm-gate.
  

Figure 4.2. Wholesale

Figure 4.2 description: Figure 4.2 shows the inputs, outputs and productivity data for the wholesale sector, 2000 to 2022.

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• Total factor productivity of food wholesale increased by 2.4 per cent in 2022, while in the last 10 years average annual productivity increased by 1.0 per cent.
• Between 2021 and 2022, inputs increased by 4.0 per cent, while outputs increased by 6.5 per cent leading to the increase in productivity.
• The increase in productivity since 2020 likely reflects the industry’s relationship with the catering sector, which demonstrates a strong post-pandemic recovery.
• Labour input has increased by 1.0 per cent since 2021. In the last 10 years the average annual labour input increased by 0.4 per cent. Labour decreased by 12.4 per cent between 2008 and 2009 but increased by 18.0 per cent between 2011 and 2012.
• In 2022 the wholesale sector contributed 13 per cent to Gross Value Added of the food chain beyond the farm-gate.
  

Figure 4.3. Retail

Figure 4.3 description: Figure 4.3 shows the inputs, outputs and productivity data for the retail sector, 2000 to 2022.

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• Productivity of the food retail sector decreased by 0.6 per cent in 2022.
• In the last 10 years, average annual productivity has increased by 1.0 per cent. Since 2000, inputs and outputs have followed a similar pattern to each other resulting in little change in productivity up until 2016 when the two values diverged.
• The effects of the Covid-19 pandemic do not appear to be as marked compared with the other sectors.
• Outputs continued to increase in 2021, while inputs flattened out, both inputs and outputs then decreasing in 2022. This may well reflect changes in, for example, staffing costs and sales (including a switch by consumers to the use of catering services), respectively.
• Labour input has shown no significant change since 2021. In the last 10 years the average annual labour input increased by 0.2 per cent.
• In 2022 food retailing contributed 28 per cent to Gross Value Added of the food chain beyond the farm-gate.
  

Figure 4.4. Catering

Figure 4.4 description: Figure 4.4 shows the inputs, outputs and productivity data for the non-residential catering sector, 2000 to 2022.

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• In 2022 non-residential catering productivity increased by 3.3 per cent.
• The increase in productivity was due to inputs which increased by 14.0 per cent and outputs which increased by 17.8 per cent, resulting in the rise in productivity.
• The rise in index values since 2020 highlights a recovery in the industry since the Covid-19 pandemic, reflected in an increase in sales for the bar, restaurant, take-home and home delivery food chain actors, bolstered by an increase in tourism.
• Before 2020 productivity was strong and at its highest level since 2006. In 2009 productivity dipped due to the recession and people cutting back on some expenditures such as eating out. Productivity is now at its highest point since 2000.
• Labour input has increased by 7.9 per cent since 2021. In the last 10 years the average annual labour input increased by 1.3 per cent.
• In 2022, non-residential catering contributed 33 per cent to Gross Value Added of the food chain beyond the farm-gate.
  
  

Benchmarking the UK food chain against the wider economy

An estimate of total factor productivity in the wider economy is calculated for comparison purposes from the same data sources as the food chain using the same method. This measure does not cover the full economy but rather non-public sector industries that are covered by the Annual Business Survey. Financial services are the largest sector not included in the measure.

In 2022 the productivity of the food chain increased by 2.0 per cent, while the productivity of the wider economy increased by 2.6 per cent. Both index values demonstrate recoveries since the end of the Covid-19 pandemic. In the 10 years prior to 2022, the average annual growth rate of the food chain was 0.8 per cent while the wider economy’s average annual growth rate was 0.4 per cent. For the last 10 years, the food chain had a higher productivity than the wider economy, except for 2014 and 2015.

Figure 5.1. Total factor productivity of the UK food chain compared with the wider economy for the UK

Figure 5.1 description: Figure 5.1 shows the total factor productivity of the UK food chain sector compared with the wider economy for the UK, 2000 to 2022.

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Background notes

TFP calculation

The method incorporates the inputs and outputs that are associated with monetary transactions but does not incorporate external effects on society and the environment. TFP differs from labour productivity by factoring in capital consumption. This calculation covers labour, capital and purchases while output is the volume of sales. TFP is measured only in the form of changes as the change in the ‘volume of outputs’ divided by the change in ’the volume of inputs’. The series is annually rebased and chain linked. Inputs are measured in the form of labour, capital and purchases. Purchases (mainly food but also energy, water and other consumables) dominate the inputs in all sectors.

Figure 6.1. Contribution of inputs

Category	Capital	Purchases	Labour	Total
Manufacturing	4	81	15
Wholesale	1	91	7
Retail	3	78	18
Catering	6	57	36

Figure 6.1 description: Figure 6.1 shows the contribution of inputs in 2022. A more detailed methodology note to accompany the release sets out methods, assumptions, data sources and revisions.

Factors influencing total factor productivity

In economic theory, total factor productivity (TFP), also called multi-factor productivity, measures the combined productivity of all factors of production used to produce the output. Increases in total factor productivity reflect a more efficient use of inputs and TFP is often taken as a measure of long-term technological change or dynamism brought about by such factors as technical innovation. Explaining year to year changes in TFP is not straightforward as there is no single factor that can explain changes in TFP behaviour.

There are several macro and micro economic factors, which together can help to understand patterns in the TFP behaviour:

Changes in technology

Factors of production typically include land, labour, capital and natural resources. These inputs are used directly to produce a good or service. Technology, on the other hand, is used to put these factors of production to work. A firm doesn’t purchase additional units of technology to feed into the production process in the same way that a firm might hire more labour in order to increase output. Instead, the technology available in a particular industry or economy allows firms to use labour and capital more or less efficiently. Advances in technology alter the combination of inputs or the types of inputs required in the production process and that usually means that fewer and/or less costly inputs are needed. Innovation is the driving force behind these leaps in efficiency.

Macroeconomic factors

Economic stability (e.g. inflation, interest rates, and exchange rate), levels of taxation, fiscal and monetary policies can lead to changes in the level of output produced in the economy. For example, fluctuations in commodity prices resulting from increased/low levels of inflation or exchange rates can cause higher/lower input prices and subsequently affect the production cost and the TFP. Economic shocks and cyclical movements of the business cycle (intrinsic periods of recession to recovery) can also account for changes in total factor productivity.

Overall openness to international trade and capital mobility are expected to boost productivity growth. International trade spurs competition –which leads to innovation– as well as serves as a channel for technology diffusion amongst nations. Generally, openness to capital flows (Foreign Direct Investment) is associated with technology diffusion and knowledge transfers, which in turn boost productivity growth.

Human capital

Labour skills positively affect productivity because of its inherent contributions to capital productivity, innovation and technological change. In addition, better labour skills may also increase the capability of an economy to benefit from externalities created by international trade and capital flows.

Institutions

Institutions and the overall legal framework of an economy shape the incentives for both factor accumulation and innovation and therefore play an important role in fostering technological change as well as improving the overall allocative efficiency of factors of production. Furthermore, technical change is significantly impacted by innovation through public research and improved human capital through education and health care access.

Covid-19

The Covid-19 pandemic affected all parts of the economy (and the food chain in turn) in 2020 and hence impacted on the collection of the ONS statistical sources that underpin the calculation of TFP at the time.

Through food and drink manufacturing being designated a critical sector in 2020 (with the labour force mostly being designated as key workers), businesses implemented a range of measures in that year to ensure business continuity. This included testing, the adjustment of working patterns and shift arrangements, as well as other biosecurity measures, leading to a likely underestimation in input costs in the 2020 data, as reported in the previous statistical release.

Wholesalers were affected differently, this being dependent on the type of business, e.g. those supplying smaller retailers were largely unaffected, in contrast to those supplying catering companies or schools for instance.

During the 2020 lockdown periods, retail became the most important source of food for most consumers, with a resultant diversion from other sectors to retailers’ shelves. Whilst this contributed to a rise in outputs, as with manufacturing, there were also associated costs due to social distancing measures, requiring a strengthening of home delivery and ‘click and collect’ services, for example. The main reasons behind the productivity performance in 2021 are most likely to be due to a decline in employee numbers along with a strong online performance.

Conversely, the catering sector was effectively paused for around 3 months of 2020, workers not being classified as key workers, many being either furloughed or switched to other roles, leading to recruitment issues as the sector slowly reopened. Although the covid-related constraints were largely present in 2021 to a certain extent (for example, close contact covid infection alerting software ultimately led to a number of workers in the manufacturing sector being unable to work; in the catering sector, remaining restrictions on eating out led to a degree of consumer reticence), a measure of “recovery” was anticipated within the industry as the economy in general began to open up again, although possibly not back to pre-pandemic values at this stage.

Users and potential uses of this data

Defra use TFP in the food chain beyond agriculture as a measure of how well the UK food industry beyond agriculture is improving its productivity and thereby on course to be competitive in the future.

Domestically a more competitive, profitable and resilient farming and food industry is needed. As the UK economy recovers, this sector, like all others, needs to maximise its potential for sustainable growth, maintain and increase its chance of securing European and global trading opportunities, and meet society’s needs. We also need a basic level of resilience against changing environmental conditions, price fluctuations, financial uncertainty and food availability.

The Food and Drink Federation use this data to communicate to its members (by tracking the industry’s progress and promoting the sector) and they make this information available on their website.

Food and drink businesses can also use this data to track progress of the industry in general but this measure is not comparable with competitiveness measures applied to individual businesses and cannot be used to benchmark their own performances.

This measure is not directly comparable with the general calculation used by the Office for National Statistics to measure whole economy productivity. To enable a comparison with the wider economy we calculate TFP growth in the wider economy using this calculation, i.e. data from the annual business survey. It is limited to coverage of the economy by the Annual Business Survey. The Annual Business Survey is the main structural business survey conducted by the Office for National Statistics. Prior to 2009 it was known as the Annual Business Inquiry - part 2. It collects financial information for about two-thirds of the UK economy, covering agriculture (part); hunting; forestry and fishing; production; construction; motor trades; wholesale; retail; catering and allied trades; property; service trades. The financial variables covered include turnover, purchases, employment costs, capital expenditure and stocks. Further details on the survey are at: Annual Business Survey – ONS

The original research this statistics release is based on was published in May 2006 and is available here: UK Food Chain Productivity research. Total factor productivity of agriculture is published in Agriculture in the UK Chapter 5. Data up to 2022 is available in Figure 5.1.

Accredited Official Statistics status

Accredited Official Statistics status means that our statistics meet the highest standards of trustworthiness, quality and public value, and it is our responsibility to maintain compliance with these standards.

These statistics were published for the first time in April 2011. They were designated as Accredited Official Statistics in June 2013 following a full assessment against the Code of Practice for Statistics.

Since the latest review by the Office for Statistics Regulation, we have continued to comply with the Code of Practice.

Glossary

Economic Definition of the food sector

The UK food sector is defined in terms of the standard industrial classification (SIC 2007) as food manufacturing, food wholesaling, food retailing and non-residential catering:

Category	SIC codes
Food and Drink Manufacturing	10 + 11
Food and Drink Wholesale	46.3 (excluding 46.35) + 46.17
Food and Drink Retail	47.2 (excluding 47.26) + 47.11 + 47.81
Non-Residential Catering	56

The deductions are to remove non-food items as far as possible.

Food and Drink Manufacturing

The sector comprises of nine main categories including processing and preserving meat, dairy, fruit and vegetables, oils, bread, biscuits and cakes, and confectionary. Animal feed manufacturing is included, covering both farm animal feed and pet food, and representing 8.4% of total turnover in food and drink manufacturing in 2022. The drink manufacturing sector includes alcoholic beverages and soft drinks and mineral waters.

Food and Drink Wholesale

The sector consists of the buying, storage and reselling of food either manufactured or freshly produced. Wholesale of tobacco products is not included.

Food and Drink Retail

The sector is defined as the sale of food within both non-specialised stores (e.g. supermarkets) and specialised stores such as butchers and bakers.

Non-residential Catering

This consists of restaurants and bars involved in preparation and serving of food, alongside canteens and catering services. Hotels are not included.

Gross Value Added (GVA)

GVA is the difference between output and intermediate consumption for any given sector / industry. This is the difference between the value of goods and services produced and the cost of raw materials and other inputs which are used up in production.

Inputs

Inputs are labour (total hours worked), capital expenditure and purchases (of goods materials and services).

Outputs

Output is turnover (volume of sales of products).

UK non-financial business economy

The ABS estimates cover the UK non-financial business economy. This is approximately two-thirds of the whole UK economy, by gross value added (GVA). The industries that are included in the survey (by Standard Industrial Classification) are:

• agriculture (support activities 01.6 and hunting, trapping and related service activities 01.7), forestry and fishing – part of section A

• production industries – sections B to E

• construction industries – section F

• distribution industries – section G

• Other service industries – sections H, I, J, K (insurance and reinsurance, groups 65.1 and 65.2 only), L, M, N, P (excludes public sector), Q (excludes public sector, and medical and dental practice activities, group 86.2), R, S
  
  

Data in this release comes from the Annual Business Survey published in May 2024, the Annual Survey of Earnings and Hours published in October 2023 and Capital Stocks: Consumption of Fixed Capital published in January 2024. The next TFP update will be in July 2025.

Enquiries to: David Lee Tel: +44 (0)20 8026 3006 email: david.lee@defra.gov.uk

Defra
Food Statistics team
2nd Floor, Seacole Building
2 Marsham Street
London
SW1P 4DF