A survey by the UK industry body, The Food and Drink Federation (FDF), has revealed improved confidence amongst manufacturers but also highlighted key concerns.
The FDF’s 2019 Business Confidence Report reveals that while official data signalled weak investment and growth for food and drink manufacturing in the first three quarters of the year, the sector reported improved optimism in the final quarter.
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The survey showed net confidence in the industry improved by 29 percentage points from last year’s first quarter, although it remains negative overall, and larger businesses are more optimistic about the year ahead for the UK economy than SMEs.
Some 47% of manufacturers foresee UK business investment rising in 2020, while 63% see increased domestic demand as an opportunity for their business this year, and more than 40% are looking forward to increased certainty over the UK’s future EU relationship.
However, key concerns remain for businesses in 2020, including the cost of ingredients, inconsistent policies on plastic reduction, and border/customs issues – all of which were highlighted by more than two thirds of manufacturers.
But FDF’s latest data shows the proportion of manufacturers that were pessimistic about business conditions declined in the fourth quarter, with more reporting improved business confidence than in any other quarter of 2019. Manufacturers are also more optimistic about future business conditions, with the share of companies predicting a decline in UK-wide business confidence having fallen by more than a third.
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By GlobalDataPlanned investment in new product launches and new machinery are seen as opportunities for more than a third of manufacturers in 2020. Other opportunities include the possibility of increased domestic demand, increased certainty over a future EU relationship and increased demand for healthy food products.
However, whilst the outlook seems to be more positive than in previous quarters, net confidence remains in negative territory as businesses continue to be impacted by increased input costs and reduced product margins.
A wide range of practical factors relating to Brexit, the UK’s departure from the European Union, were also highlighted as barriers to success, including UK import tariff uncertainty and the possibility of failing to secure a free preferential trade agreement with the EU, all of which were reported by over 50% of manufacturers.
FDF chief executive Ian Wright said: “It’s no surprise that the industry remains troubled following a period of sustained uncertainty, with our future relationship with the EU still unresolved. But our industry is phenomenally resilient.
“FDF is absolutely committed to working with government and the devolved administrations to develop detailed plans and practical solutions for our vital industry as we leave the EU. It is essential that we minimise friction in whatever way possible, while maintaining high standards for UK food and drink.”
