food manufacture

Price of ingredients have gone up in recent months and are expected to keep on rising, making for a gloomily outlook from manufacturers

Business confidence among food and drink manufacturers has slumped in the run up to tomorrow’s Budget, with big companies most hit by uncertainty, according to a poll by the FDF.

The survey found 41% of businesses were less confident about the UK’s business environment than when last polled by the organisation - in October last year.

Concern was at its height among large companies, the FDF found, with 41% less confident, compared with just 15% who were more confident, than four months ago.

Among SMEs, 41% were less confident though more than a third (34%) were more confident about the outlook.

Soaring ingredients costs amid the weak pound was a key factor in the findings. An overwhelming majority (90%) of respondents said they had seen the price of ingredients and raw materials increase in recent months and expected to see further increases in the next two years.

Nearly two-thirds (65%) had seen a negative impact on their product margins.

There was some light at the end of the tunnel: the survey found producers hoped to offset immediate and long-term challenges by growing volume sales primarily in the domestic and non-EU markets. Nearly two-thirds (64%) of respondents expected to see their UK sales volumes increasing in the next two years.

In 2016, food and drink exports broke through the £20bn barrier for the first time.

Nearly two-thirds of companies (63%) surveyed expected their exports to non-EU countries to increase, with 40% also expecting to target export growth in the EU market.

“Almost half of our members are less confident in the prospects for business than they were four months ago,” said FDF director general Ian Wright (see video below). “That is driven by ingredient price rises and from already tight margins being squeezed still further as competition continues to rage between the supermarkets.

“But it’s a mixed picture. Nearly two-thirds of members expect to see sales in the UK grow over the coming months. The same number see sales outside the EU growing too. We also know around half of our members expect sales within the EU to grow, so they’re optimistic about their future while worrying about the trading environment.”