Concerns are mounting about the impact of Brexit on the food and drink manufacturing sector with confidence in the industry is becoming more fragile, according to a survey of Food and Drink Federation (FDF) members.
The survey coincides with quarterly figures from UK retailers showing food sales at their highest levels since 2013, suggesting a disparity between business and consumer confidence levels.
Following the UK’s vote to leave the EU, a majority of food and drink companies responding to FDF’s survey reported increased ingredient prices, a drop in product margins, and concerns for the future raised by their EU workforce. More than two thirds (69.5%) of respondents are less confident about the UK business environment, with only around one in ten (11.2%) more confident.
FDF is calling for an industrial strategy partnership with Government to support the development of food and drink manufacturing, a sector in which the UK has a competitive advantage.
Food and drink manufacturing supports 3.9 million jobs across the £108bn UK food chain and employs 400,000 people directly. Of these, almost a third (29%) are non-UK EU nationals. A large majority (71%) of companies surveyed employing EU staff report their EU employees have expressed concerns about the Referendum outcome, with around one in 12 (8.7%) reporting that EU employees intend to leave the UK. The FDF is calling for urgent assurances for the industry’s workforce from the EU that they will have leave to remain in the UK.
Food and drink producers are also face tough trading conditions, with three quarters of companies seeing ingredient prices increase largely as a result of the weak pound, with product margins falling for most survey respondents. This trend is expected by most companies to continue over the next 12 months. The FDF said that urgent action from Government is needed to ensure essential imports of ingredients and raw materials from the EU and EU Free Trade Agreement (FTA) countries do not face tariffs or costly non-tariff barriers.
Ian Wright CBE, Director General of the Food and Drink Federation, said: “We share Government’s view that we need to make the best of Brexit. Food and drink industry confidence is low. Slower revenue growth, coupled with prolonged business uncertainty, is affecting the industry’s ability to invest.
“The assurances we heard from Government last week must be underpinned by credible plans for restoring confidence and negotiating a workable future relationship with the EU. Working with Government through an industrial strategy partnership, we believe we can counterbalance uncertainty arising from the EU exit process and secure world-class status for the sector.”
John Stevenson MP, Chair of the APPG for Food and Drink Manufacturing which meets today to discuss what Brexit means for the sector, said: “Brexit will present both challenges and, through sensible negotiation, opportunities for businesses in the UK’s largest manufacturing sector – food and drink. Government and industry partnership has never been more important to the future of this vital sector. It is essential that colleagues in Government go into negotiations equipped with a clear understanding of this sector’s priorities, which is why open dialogue and the active participation of food companies and their representative bodies in this debate is so essential. Food and drink is a national success story, with massive untapped opportunity to boost exports and improve its already impressive productivity performance, delivering even more for the UK economy.”