Food and Drink Federation report highlights weak growth

Results from the latest Food and Drink Federation (FDF) 2019 Business Confidence report, have revealed weak investment and growth for the sector in the first three quarters of the year.

However, the organisation’s study pointed to improved optimism in the final quarter of the year, with larger firms being more upbeat about prospects for 2020 than SMEs – which are less able to absorb the potential impact and trading uncertainties surrounding Brexit.

Among the study’s main findings was the fact that 47% of manufacturers, which includes businesses working within the confectionery and bakery segments, foresee UK business investment rising in 2020.

Furthermore, a total 63% see increased domestic demand as an opportunity for their business this year, and over 40% are looking forward to increased certainty over the UK’s future EU relationship.

Key concerns for businesses going into 2020 include the cost of ingredients, inconsistent policies on plastic reduction, and border/customs issues – all of which were highlighted by over two thirds of manufacturers.

FDF’s latest data shows that the proportion of manufacturers who were pessimistic about business conditions declined in Q4, 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 over a third.

In Q4 2019, 33% believed business confidence would rise in 2020, compared to just 2% in Q4 2018 who felt this way about the year ahead.

Planned investment in new product launches and new machinery are seen as opportunities for over 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.

Looking ahead to 2020, key concerns for businesses include the cost of ingredients, inconsistent policies on plastic reduction, and border/customs issues – all of which have been highlighted by over two thirds of manufacturers.

A wide 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, all of which were reported by over 50% of manufacturers.

FDF Chief Executive Ian Wright CBE 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.

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