Pressures to cut costs are increasingly jeopardising manufacturers' efforts to improve health and safety.
UK food and beverage manufacturers’ health and safety (H&S) standards are being jeopardised by pressures to cut costs.
Lockton research found that 38% of manufacturers think safety standards are being eroded as a direct result of cost cutting. And 32% said production facilities are now less safe for the same reason.
38% of food and beverage manufacturers think safety standards are being eroded as a direct result of cost cutting.
The findings are from Lockton’s new report – ‘The tipping point: cost cutting pressure piles recall risk onto UK food and drink manufacturers’. The report found that 76% of manufacturers feel under pressure to reduce their prices to meet retailer demands, with 31% strongly agreeing that this is the case.
Human versus financial costs
Worryingly, our survey also found that 55% of manufacturers have reduced or would reduce their focus on improving safety standards in order to meet contractual demands.
Three quarters (74%) of manufacturers are concerned about on-site accidents, found our research. And 61% believe there is a lack of focus among staff on H&S issues.
55% of manufacturers have reduced or would reduce their focus on improving safety standards in order to meet contractual demands.
This concern for H&S is reflected in data from the Health and Safety Executive: while there was a long-term downward trend in the rate of fatal injury in workplaces, in recent years this has shown signs of plateauing.
More generally, fines for H&S offences in the UK have more than doubled in the past year. This follows sentencing guidelines introduced on 1 February 2016 that toughened penalties for H&S and corporate manslaughter offences.
Total fines for businesses increased from £35m to £73 in the first year of new sentencing guidelines, according to data obtained by law firm Clyde & Co. The manufacturing sector paid the most in fines, with the figure rising 99% to £22.8m, compared with £11.4m the previous year.
Under the new sentencing guidelines – introduced under the Coroners and Justice Act 2009 – the scale of fines varies according to company turnover, but can exceed £20m for the very worst cases involving corporate manslaughter.
The pressure to reduce costs is directly impacting manufacturers’ level of risk when it comes to liability.
In addition to the strong moral imperative for ensuring robust H&S standards and the increasing size of fines (which are mostly uninsurable by law due to their punitive nature), the increased media coverage of H&S issues in recent months means the reputational risks involved in H&S failings are only likely to increase.
Manufacturers now stand at a crossroad. Wander too far down the cost-cutting route and they risk compromising on H&S. However, failure to respond to demands to cut costs could leave them struggling to win new business, particularly with larger retailers. With inflation on the rise and a renewed focus on price pressures, the ability to tread the right balance between cost efficiency and H&S will be an essential skill for manufacturers to learn.