State of industry report Q1 2023

21 June 2023

In recent years, there has been unprecedented disruption across the supply chain following the quick succession of three structural shocks – Brexit, a global pandemic and the war in Ukraine – which has disproportionately impacted food. This has led to substantial upward pressures on all cost elements of the industry, from ingredients, labour and packaging to energy, transport and logistics.

Faced with these cost rises, food and drink manufacturers have used a variety of ways to shield consumers from the full impact of these increases, compared with the other industries and parts of the food chain, including reducing production and freezing recruitment.

The State of Industry report reveals this approach means vital infrastructure and innovation projects are being halted or postponed, which is likely to have a negative impact on long-term productivity and jobs for the wider economy.


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Executive summary

  • The FDF net confidence score gained 17 percentage points in Q1, reaching -30%, reflecting mainly perceptions that market conditions have stabilised in Q1 compared to Q4.
  • Business conditions for Q2 are expected to remain the same or improve.
  • Labour shortages continued to slow in Q1 to 5.9% from 7.0% in Q4, with vacancies recorded across all skill levels.
  • Average pay in the industry increased by 4.1% over the year to March 2023, and over half (56%) of manufacturers awarded bonuses or a one-off cost of living payments to retain their staff.
  • Wages are expected to rise by 5.4% over the coming year.
  • Margins continue to take a hit. On average, total costs increased by 15.4%, while selling prices rose by 12.5% over the year to March 2023.
  • Over the next twelve months, manufacturers expect costs to continue to climb by 5.0% and selling prices by 5.4%, on average.
  • Innovation in new products and new manufacturing processes were producers’ top priority in Q1 for 61% and 52% of them, respectively.

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