The Food and Drink Federation’s (FDF) new State of Industry report shows more than half of businesses are likely to limit their investment due to uncertainty about the impact of upcoming regulations and the recent Budget measures.
The study, which covers the third quarter of this year, found that business confidence remained at the same level as the previous quarter (-6%), with many food and drink manufacturers looking to boost investment in the next 12 months. Two-fifths of businesses plan to increase their investment in R&D (40%), plant & machinery (44%), and skills & training (44%) in the coming year.
However, the report notes that the current business environment is creating obstacles. More than half (53%) of manufacturers say they’re likely to limit investment over the next 12 months due to uncertainty about upcoming regulations. For example, the upcoming Extended Producer Responsibility (EPR) legislation, recent National Insurance employer contribution changes, and minimum wage increases taken together will add billions of pounds in additional costs for UK food and drink manufacturers in 2025.
The FDF stated that ensuring businesses have clearer guidance from the government and are appropriately consulted ahead of these and any future legislation will provide the confidence they need to drive investment.
Other major barriers include taxation (31%) and lower financial returns due to a less favourable business environment (31%). The study highlights that with a £14bn untapped growth opportunity available to food and drink manufacturers, the government creating a more supportive and stable business environment could provide businesses with the confidence they need to unlock this investment in the UK.
The FDF suggested that the government’s latest Budget could also impact this fledgling opportunity for business growth. A separate flash survey undertaken in November found that 71% of food and drink manufacturers believe the Budget will have a negative impact on employee pay. With unfilled vacancies rising to 5.1% in the last quarter and 25% of businesses highlighting that labour and skills shortages will limit their investment in the year ahead, it’s vital that government provides clear guidance and listens to input from business on new employment regulations as soon as possible.
“Investment is vital to the long-term health and resilience of our industry, as well as to countering inflation,” said Balwinder Dhoot, the FDF’s Director of Industry Growth and Sustainability.
“While it’s positive to see businesses planning to boost their investment in UK production, this will have been impacted by raised costs in the budget.
“With businesses facing billions of pounds of additional tax and regulatory costs next year, we urge the government to double down on its growth mission. From removing barriers to trade, to reviewing regulation and planning rules, adopting a more collaborative relationship with business, government can do more to boost business and consumer confidence, and drive investment.”
NAM Implications:
- Patently, businesses need credible reassurance, even ‘proof’ re current market uncertainties from the government…
- …before taking the risk of investing in their businesses…
- …in a low-return economy.
- i.e. ‘wait & see’ has longer to go….
