Confidence among UK food and drink manufacturers has plunged as businesses grapple with rising costs and regulation, trade body The Food and Drink Federation has said.
A report issued by the industry association said business confidence in the sector fell to -47% in the final quarter of 2024, a 41-percentage point decline from the previous quarter.
The score was the lowest since the fourth quarter of 2022, with companies citing worsening economic conditions following measures introduced in the 2024 Autumn Budget.
More than half (57%) of businesses reported deteriorating conditions, while a third saw no improvement, the FDF said.
Driven by rising energy, labour, and commodity costs, the “inflationary pressures are gathering pace”, the survey revealed.
Balwinder Dhoot, the FDF’s director of industry growth and sustainability, said “doing business in the UK is becoming increasingly expensive”.
The FDF report said upcoming regulatory changes are expected to add further financial strain, including increases to Employer National Insurance Contributions, the minimum wage, and compliance with new laws on employment and packaging.
After 16 months of disinflation, annual food and non-alcoholic drink inflation began rising again in September, reaching 3.3% in January, up from 2% in December.
While prices fell the “fastest” for pasta and couscous (-5.9%) and jams and marmalade (-3.2%), the “highest” increases were recorded for edible offal (20.2%), butter (18.3%), and olive oil (16.6%), the FDF said.
More than half (54%) of food and drink manufacturers see UK taxation as the biggest constraint on investment, while 52% cite upcoming regulations as a major barrier.
For 74% of manufacturers, growing UK market sales remains a top priority, the FDF said.
Restructuring operations to maintain competitiveness is the second priority for 45% of respondents.
The FDF report said “streamlining operations is vital to remain competitive”.
Labour shortages showed signs of improvement in the fourth quarter, with vacancy rates falling to 3.6%, down from 5.1% in the third quarter of 2024.
