Food and drink firms in England and Wales are putting post-Brexit uncertainty behind them to raise growth forecasts and plan to create more than 75,000 new jobs over the next five years, according to a new report published today (7 September).
Some 44% of businesses surveyed see leaving the EU “as the biggest potential threat to the industry”, the study by Lloyds Bank Commercial Banking said.
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However, Lloyds said that finding was unchanged since its previous study, which was conducted last year, and the bank said the sector is looking to put the referendum behind it.
Some 52% of companies said the build-up to the UK’s referendum to leave the EU on 23 June had had a negative impact on their business, while 82% said the referendum had affected their investment plans before the vote.
However, the study, the bank’s third annual report on the food and drink sector found the companies surveyed are forecasting 19% growth in the next five years, up three percentage points from 2015.
Almost half of firms (44%) said planned investment in their business had increased since the vote result, twice as many as the 22% who said it had fallen.
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By GlobalDataNevertheless, businesses do see leaving the European Union as the biggest potential threat to the industry (44 per cent), a view which remains unchanged year-on-year.
Lloyds said a “broad cross-section” of 100 food and drink manufacturers and producers in England and Wales were interviewed for the study from companies ranging in size from an annual turnover of less than GBP25m (US$33.5m) to more than GBP750m.
A small majority of businesses said their expectation of growth was higher now that the vote had been held, with 37% expecting increased growth in the wake of the referendum against 32 per cent who had downgraded their growth predictions.
Firms in the industry are “eager to shrug off uncertainty in the run-up to the referendum and move ahead with their plans to enter new UK markets and develop new products”, the study said.
Of the firms surveyed, a third (32%) highlighted joint ventures as a potential route for funding growth over the next five years.
“Almost half of firms (44%) said that planned investment in their business had increased since the vote result, twice as many as the 22% who said it had fallen,” according to the survey. “Although the majority of firms said that the EU referendum had affected their long-term planning (89%) and their investment plans (82%) before the vote, it now seems that the sector is looking to put the referendum behind it.”
Andrew Connors, head of client propositions at Lloyd’s Commercial Banking, said: “The food and drink industry has faced some unprecedented challenges in 2016, notwithstanding the uncertainty surrounding the EU referendum vote. However, our research shows a relatively confident and upbeat sector, which recognises the challenges ahead and is finding ways to address them. In particular, food manufacturers are working together more to improve productivity through joint ventures.”
The study indicated food and drink producers in England and Wales are eyeing growth through entering new export markets, with 30% focusing their growth ambitions overseas – the same figure as in the bank’s 2015 report.
However, the number of exporting firms targeting western Europe has declined from 60% last year to 47% this year, “though it remains the top target for the sector”, the study said. “In fact, intentions to target all the major markets have declined slightly, with the exception of eastern Europe and Russia, which 33% of firms now plan to target – an increase of 22% on 2015. This is despite the Russian embargo on EU food imports,” the report notes.
A third of firms surveyed have increased plans for R&D activity in response to the referendum result, with just 17% revising down their R&D plans, according to the study. “When asked how they plan to fund growth over the next five years, joint ventures emerged as a popular route, with a third of firms (32%) looking to team up with fellow food and drink companies to share knowledge and access to different customer groups and markets.”
The study also revealed “a continued focus on productivity”, as companies aim to make efficiency savings (42%), streamline processes (37%), invest in staff training (34%) and restructure operations (30%).
A “growing number of firms” reported the depressed oil price is having a positive impact on their business, up from 19% to 32% “and concerns about agricultural price volatility seem to be easing too”, the study said.
Ian Wright, the director-general of industry association the Food and Drink Federation, said: “The decision to leave the EU poses a major test to most food and drink businesses. Yet we are a resilient and resourceful industry. We are now focused on transforming those very real risks into real opportunities.”
Business owners, managers, senior managers, directors and department heads took part in the survey, which was conducted during last June and July by Coleman Parkes Research.
