Consumers set to pay more for apples as government measures kick in

The price of producing a kilo of apples is expected to rise by 7p when changes to government tax policy come into force next month, apple growers have warned.

From 6 April, British growers in the topfruit sector – along with many other businesses – will be managing increases to employers’ National Insurance (from 13.8% to 15%), combined with a reduction to the threshold for employer’s NI, and a rise in the national living wage.

New data commissioned by British Apples & Pears and carried out by Andersons Farm Consulting has estimated the impact of these changes would see the median cost of producing a kilogram of apples rise from £1.33 to £1.40, which would ultimately translate to further retail price inflation across the category.

Apple prices in the major supermarkets were already 7.3% dearer last year, according to NIQ data for The Grocer’s Top products survey [52 w/e 18 September]. Pear prices, meanwhile, were up 10.3% on 2023 levels – with the hikes driven by rising production costs and increasingly challenging production conditions.

Employment costs now account for half of the total costs of producing British apples and pears, and it was this high level of wage inflation that made the impact of the new changes to taxation so significant for growers, said BAP.

“Growers’ margins have been stripped to the bone, so these increases in the cost of producing British apples and pears will have to be passed on to retailers, who have already said they will have to pass on wage rises to consumers,” explained Ali Capper, executive chair of BAP.

“Unfortunately, the end result is that shoppers will end up paying more for their fresh apples and pears.”

The grower group also warned there would be a related impact on confidence and longer-term investment plans, as a result of the changes.

Read more: Farming confidence falls to all-time low, NFU survey finds

It comes as the latest survey of growers by BAP found only 17% of its members were feeling more confident than they were a year ago, with almost half (43%) saying they felt less confident.

In a separate survey by the industry body, four in five (81%) growers said they were not planning on building any new storage facilities in the next five years. Many pointed to low returns, lack of confidence and greater financial uncertainty caused by budget announcements as key reasons for investment slow down.

“Given the global climate crisis and increasing geopolitical volatility, food security should be a key priority for all of us. We have the ideal climate for growing apples and pears,” said Capper. “Our farmers are ready and willing to grow more healthy, environmentally-friendly and delicious British apples and pears to help reduce our reliance on imports.

“We just need the government to recognise that and stop putting barriers in our way.”

Read more: Farmers won’t go quietly on Inheritance Tax as Reed takes heat at NFU Conference

Also announced in the budget was the government’s much-criticised Inheritance Tax policy, which will require farmers to pay IHT on all agricultural and business property over £1m.

“Farm assets such as land, worker housing, cold storage and packhouses are capital employed and should not be taxed on the death of an individual,” said Capper. “Instead the government should use the capital gains tax route to tax the sale of business assets.

“Today, if growers follow government advice to try to mitigate the tax, they face huge bills for lawyers and accountants,” Capper added. “That’s money that should be being spent on new orchards, renewable energy and automation. This is a tax that prevents investment and growth in businesses.”

The grower group has called on the government to “take these warnings seriously” to encourage growth and investment in the sector.

“There is a genuine crisis of confidence in the British apple and pear industry,” she said. “It really saddens me that as a direct result of government policy, growers feel unable to invest in the future.”