The concerns within the UK’s largest manufacturing sector are mounting, as consumer confidence in the food and drink industry is becoming more fragile, according to a new report.
The Food and Drink Federation (FDF) found that three quarters of food and drink companies are 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 and the FDF say 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.
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.
Overall, the FDF found 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.
The federation 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.
Ian Wright CBE, director general of the Food and Drink Federation, said: “We share [the] 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.”
Food and drink manufacturing supports 3.9 million jobs across the £108 billion 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. FDF is calling for urgent assurances for the industry’s workforce from the EU that they will have leave to remain in the UK.
FDF’s survey results reflect the sentiment of one third of its full membership including micro, small, medium and large food and drink manufacturers.
John Stevenson MP, chair of the APPG for Food and Drink Manufacturing 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.”