The government must prioritise policies that support food and drink manufacturers to boost investment
05 December 2023
The newly published FDF Industry survey found that manufacturers are committed to growth, with over four in ten planning to increase their investment over the next year. However, government must prioritise policies that support food and drink manufacturers to boost investment.
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The Food and Drink Federation (FDF) has today published the Q3 State of Industry Report. This found a mixed picture on investment expectations with not all businesses in a position to increase their capital spending and worryingly, nearly one in five (18%) report they expect their investment to fall over the next year. Some manufacturers are in a better position and are committed to growth, with over four in ten (41%) planning to increase their investment over the next year. According to ONS data, the industry’s business investment in real terms during the first half of 2023 was 36% below its level during the first half of 2019, in sharp contrast to investment in the UK overall, which has increased by 7%.
The report also reveals that confidence has increased by 18 percentage points on the last quarter creeping into positive territory for the first time since Q2 2021. This is a sign that market conditions have stabilised, however the industry still faces significant challenges. Labour vacancies across a wide range of roles in the sector have risen in the last quarter to 6.5% from 4.8% in Q2 due to increased production ahead of Christmas resulting in more job openings that were difficult to fill. Manufacturers also report that average pay has increased by 5.2% over the last year and the National Living Wage will rise further next April.
Over the last few years, the industry has grappled with rising input costs and manufacturers continue to do all they can to absorb these costs to shield shoppers from the full impact of inflation. Manufacturers’ total production costs have increased by 14.2% in the year to September while selling price rises are standing at 10% with costs expected to rise over the next year.
The report also found that over eight in ten (81%) manufacturers are prioritising innovation and the increase in the cost of living is changing shopping habits with nearly three quarters (73%) of businesses saying they have noticed a shift in demand towards cheaper products.
Balwinder Dhoot, Director of Sustainability and Growth, The Food and Drink Federation said:
“With grocery volumes declining, manufacturers prioritising new product innovation is a way to maintain competitiveness and drive growth. The rise in confidence for the food and drink industry is a sign that market conditions have stabilised, however there are still huge challenges that face the sector.
“We need the government to prioritise policies that support investment if we are to build a sustainable and resilient food supply chain which supports growth and is vital for a strong economy. We saw some positive signals in the Autumn Statement and welcomed the announcement on full expensing, but any benefits will be more than undone by planned regulation that will hit our sector in the coming year.”