Confidence on the rise but food and drink businesses still facing hurdles

Food and drink firms are feeling more confident than they were a year earlier. Picture: PA

Publishing its latest business confidence report, the Food and Drink Federation (FDF) said 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 Q4.

The data shows that the proportion of manufacturers who were pessimistic about business conditions declined in the closing months of last year, with more firms reporting improved business confidence than in any other quarter of 2019.

Companies are also more optimistic about future business conditions, with the share of firms predicting a decline in UK-wide business confidence having fallen by over a third.

In Q4 2019, 33 per cent of companies surveyed believed business confidence would rise in 2020, compared to just 2 per cent at the tail end of 2018 who felt this way about the year ahead.

Planned investment in product launches and new machinery are seen as opportunities for more than a third of manufacturers in 2020. Other opportunities include the possibility of a pick up in domestic demand, increased certainty over a future EU relationship and higher demand for healthy food products.

Tighter margins

However, while the outlook appears 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 tighter margins.

Key concerns raised by businesses include the cost of ingredients, government policies on cutting back on plastic and border/customs issues.

A range of practical factors relating to Brexit 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.

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 the UK 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.”

At a detailed level, the report found that 63 per cent of firms see increased domestic demand as an opportunity for their business this year, while more than 40 per cent are looking forward to increased certainty over the UK’s future EU relationship.