Food and drink firms in rude health despite cost pressures

People polled about the food and drink sector were positive about the future of the industry. Picture: Gareth Easton
People polled about the food and drink sector were positive about the future of the industry. Picture: Gareth Easton
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The vast majority of businesses operating in Scotland’s £11 billion food and drink sector expect growth of up to 20 per cent in the coming year, according to a new report.

Accountancy and business advisory firm BDO’s latest food and drink survey, which is released today in association with the Institution of Mechanical Engineers (IME), shows the sector driving expansion through product innovation and investment in automation.

The report found that 79 per cent of those polled were positive about the future of the industry, with 86 per cent of firms expecting revenue growth of up to 20 per cent in the next year, but BDO warned the proposed sugar tax could have a “huge impact” on performance.

Nearly two-thirds of the firms surveyed said new product development would be a major source of growth, with 60 per cent and 43 per cent saying access to new UK markets and export markets respectively will be increasingly important.

Organic growth is seen as a key priority, with just 15 per cent expecting growth to come from mergers and acquisitions.

Martin Gill, head of BDO in Scotland, said: “Pressures on pricing and margins remain hugely challenging, but the overall sentiment of the sector is a positive one. It’s been a tough few years for food and drink companies, but it appears they are strongly focusing on future growth.

“The proposed tax on sugar will have a huge impact on food and drink manufacturers and could dent the current performance of the food and drink sector.

“The Chancellor needs to be cautious in considering any additional taxation on sugar and ensure that he supports the food and drink sector in his Budget next month.
“One action which would aid the sector would be to increase the annual investment allowance to £5 million for five years in support of automation investment and introduce a temporary reduction in employers’ national insurance for manufacturers to recruit the talent they need.”

Tim Fox, chair of the IME’s food & drink engineering committee, added: “Food and drink manufacturing plays a hugely important role in the UK and it is encouraging that the manufacturers surveyed as part of this report are so optimistic about the sector’s future.”