Confidence among the UK’s 12,500 food and drink manufacturers is in sharp decline as businesses are faced with a range of rising costs in 2025, according to new data from the Food and Drink Federation (FDF). Its latest State of Industry report found that business confidence plummeted to -47% at the end of 2024, compared to -6% the previous quarter, as manufacturers responded to measures announced in last year’s Autumn Budget and turbulence in global markets.
The industry body noted that food and drink manufacturers face increased costs on many fronts in the year ahead. Inflationary pressures are building, with energy and commodity costs rising and government policies, such as National Insurance, piling further costs on manufacturers. Meanwhile, food and drink businesses will bear the lion’s share of the new Extended Producer Responsibility (EPR) packaging rules, which are expected to cost at least £1.4bn a year from this October.
FDF stated that these financial pressures are impacting business confidence, so there’s a risk of industry investment flatlining and growth stalling. However, it believes that this trend can be reversed if the government works in patnership with manufacturers. “If government pulls the right policy levers, we can make the UK the most competitive and dynamic food and drink sector in Europe,” the FDF said.
Today, the industry body has launched Ingredients for Growth – its plan to unlock investment in innovation, boost productivity, and accelerate growth for UK food and drink manufacturing. The report sets out regulations that should be reformed or eradicated, as well as new policy initiatives that would drive growth in our sector in the UK.
Setting out 40 actions that the government could take to create the conditions for a food system that is green and adaptive, productive and innovative, the report highlights six key industry asks to remove roadblocks to growth:
- Secure a fair share of the UK’s R&D spend for food and drink manufacturing to support industry investment in new product development, healthier options for consumers, and the transition to net zero. With industry investment down 30.5% compared to 2019, FDF states that it’s critical that food and drink makers receive their fair share of government funding and support to unlock innovation in the UK’s largest manufacturing sector.
- Co-create a workforce and skills plan with Skills England to support our industry as we transition to a higher-skilled, higher-wage workforce. This would be an investment in communities in every place and region of the UK. With vacancy rates more than double those seen in wider manufacturing, FDF believes investing in skills is vital to plug this gap and to create new opportunities for both young people and those mid-career in a key part of the everyday economy.
- Simplify the R&D tax credits system to help more businesses that are struggling to invest in technology to improve productivity and innovate healthier products. There is said to be significant scope to accelerate the adoption of technology across the sector’s 12,500 businesses, with a £14bn growth opportunity for the taking.
- Ringfence the £1.4bn annual cost of Extended Producer Responsibility (EPR) to ensure these fees are only used on improving the UK’s recycling infrastructure and not to fund local authority funding gaps. “This money is for yoghurt pots, not potholes,” the FDF said.
- Prioritise a more strategic approach to EU trade relations to revive falling EU exports, which are down more than a third since Brexit. The EU Border Target Operating Model and Single Trade Window is seen as essential to this and to ensuring profitable trade with the UK’s largest trading partner.
- Simplify regulations and remove unnecessary red tape to help businesses, in particular SMEs, focus on growth and productivity.
“Everyone eats and drinks every day, and we need a strong food manufacturing sector to protect the UK’s food security, support British agriculture, and provide high quality, nourishing food at affordable prices,” said Karen Betts, Chief Executive of the Food and Drink Federation (FDF).
“To do this, the UK needs to remain competitive and at the forefront of global innovation. However, this marked decline in business confidence shows that government and industry needs to take action now to ensure we have a thriving, productive food and drink industry into the future.
“We want the UK to offer a much more competitive environment for international and domestic investment in food and drink to ensure we’re a world-leading destination for new products and ground-breaking research, as well as nurturing iconic brands that are loved here and abroad. But with pressures on industry mounting, the government must act to remove the roadblocks and accelerate growth. Together, we have the ingredients to make the UK the best place in the world to run a food and drink business.”
NAM Implications:
- NB. the cost impacts of Last Autumn’s Budget have yet to emerge from the pipeline…
- A risk of industry investment flatlining and growth stalling.
- So business concerns are understandable.
- However, given the government’s apparent immovability re removal of roadblocks to growth…
- (focus on what they do, rather than what they say)
- …prolonged breath-holding is inadvisable.
