Sector showing signs of recovery but FDF urges government intervention to unleash growth
Food and drink businesses are bouncing back, and are preparing to invest, but Government action is needed to unlock full growth potential going forward.
The Food and Drink Federation (FDF) has today published its Q2 State of Industry Report, which tracks business confidence and trends in the UK’s largest manufacturing sector.
The new analysis reveals that nearly nine out of ten food and drink manufacturers expect to maintain or increase investment levels over the coming year.
This finding is being taken as a signal that the sector has turned the corner after the policy turmoil and external shocks that have disproportionately impacted food and drink businesses, leading to a 30 per cent drop in investment since 2019.
The analysis shows that food and drink manufacturers are seeking opportunities to make long-term investment decisions in manufacturing and supply chains that are needed to secure the food supply and to create healthier and more sustainable products for UK and global consumers.
Advancing innovation and adopting new technologies are critical for economic growth, and to safeguard the UK’s long-term food security. Notably over one third of manufacturers plan to increase their R&D spend over the coming year.
The report also finds that businesses remain concerned about policy and regulatory uncertainty, and non-tariff barriers could risk denting the industry’s export competitiveness. There is a big opportunity to remove these obstacles and drive domestic and international investment to increase growth, productivity, and good jobs. Health certificates are an export barrier for 40 per cent of businesses, administrative costs are an issue for 54 per cent of manufacturers, and half of the industry regard an improved relationship with the EU as a top priority.
Balwinder Dhoot, director for sustainability and growth, the Food and Drink Federation noted how encouraging it is for the sector that manufacturers are planning to increase or sustain their investment this year.
THE FDF believes a well-crafted Industrial Strategy – working in partnership with the UK’s largest manufacturing sector – will also allow it to seize investment opportunities and tackle some of the nation’s critical challenges around food security, health, productivity and net zero.
“It is crucial for government to help establish a stable business environment that removes the burden of unnecessary and costly regulation and bureaucracy,” Dhoot explained. “We are pleased to see a renewed focus on improving UK-EU relations and barriers to trade with this significant partner. Providing targeted support for smaller businesses – who make up 97 per cent of our sector and who are disproportionately impacted by these costs and pressures – must be a priority. This approach will help make the UK the best place to invest and innovate in food and drink production.”
The State of Industry Report also highlights that reforms to the Apprenticeship Levy would help the industry thrive by addressing both the skill gaps and labour shortages. Over half of manufacturers would like to be able to use the Levy funds for engineering conversion modules or business improvement techniques.
