Lion's share of UK food and drink firms optimistic about growth despite cost challenges, according to Johnston Carmichael report

Exports flagged as key priority.

Almost seven in ten UK food and drink businesses are optimistic about growth despite costs “continuing to be a significant challenge”, according to a new survey of the sector.

Aberdeen-headquartered accountancy and business advisory firm Johnston Carmichael polled 110 firms, two-thirds of whom are Scottish, as part of an annual temperature check of the sector, finding for example that almost all those who took part experienced a rise in costs over the last 12 months, with energy bills the top source of increased outgoings at 30 per cent, followed by labour costs (25 per cent) and raw materials (23 per cent).

Respondents said they were in response seeking operational efficiencies including supply-chain review, but the vast majority said they have had to increase how much they charge consumers. Of those who took the latter course of action, more than half sought increases of 5 to 10 per cent, while 16 per cent increased prices by more than 10 per cent, although that was down from 27 per cent in 2022.

Nicola Thomas, director of the Food and Drink Exporters Association, and Adam Hardie, partner and head of food and drink at Johnston Carmichael. Picture: Nick Mailer.

Adam Hardie, partner and head of food and drink at Johnston Carmichael, said: “In the last 12 months, businesses have struggled with unprecedented cost increases. That said, the industry continues to be innovative, remains in robust health, and we all need to eat,” he added, also welcoming the fact that seven in ten food and drink businesses said they were optimistic, or very optimistic, about growth of their business – up from 60 per cent a year ago.

He also said there is a “great opportunity” around export, and called for “greater public sector investment to help support the sector’s growth ambitions, while measures to simplify international trade post-Brexit could help to boost export”. Johnston Carmichael said firms are keen to export, and while the majority of respondents cited the UK as their main market, with 56 per cent of identifying Europe as a key region, 46 per cent saying they are targeting Asia Pacific, and 40 per cent targeting North America.

However, the professional services firm also found that 35 per cent of businesses said that they were not operating globally, “suggesting a substantial growth opportunity for the UK’s food and drink sector”. With Brexit, half of businesses felt the same as they did 12 months ago, but a quarter are feeling less positive than they did last year, and some commented that they have given up entirely on trying to export into the EU due to the costs and challenges of complying with regulations. Separately, a recent report from the Scotch Whisky Association found that exports of the drink fell last year, although nonetheless the equivalent of 43 70cl bottles a second were shipped overseas in the period after a “bumper” 2022.

Nicola Thomas, director of the Food and Drink Exporters Association, said in response to the Johnston Carmichael findings: “Despite a challenging backdrop, it is encouraging to see that finding new customers in export markets is the second-most important primary growth driver for survey respondents… One key to success is for UK food and drink businesses to focus on what they do best and outsource the rest to specialists who are invaluable in helping to mitigate some of risks around export including logistics and labelling, customs, and compliance.”