Business confidence among food and drink manufacturers has plummeted to its lowest level since the Covid pandemic, ahead of Rachel Reeves’ looming budget, The Grocer can reveal.
Research released today by the Food and Drink Federation (FDF) shows a confidence score of -60 among its members, down from -40 in the second quarter of the year, where it had remained flat since the previous budget.
The third quarter survey revealed 90% of firms felt pessimistic or nervous about what lay in store in the upcoming budget. Almost as many said they feared it could bring additional taxes and business costs, after last year’s controversial budget heaped huge costs on the industry.
The FDF said it was appealing to the government to restore business confidence by ensuring no further regulatory or tax burdens were imposed.
It also warned that, despite recent signs of improvements, food inflation remains stubbornly high and is forecast to remain so for the rest of the year, driven by costs including a £1.1bn bill for the new EPR packaging tax and changes to National Insurance Contributions (NIC).
Food sector confidence previously plunged as low as -79, in the third quarter of 2022, when the WHO was still months away from declaring the Covid public health emergency over.
Business confidence concerns
The nost recent survey found the biggest concerns among companies in the sector were fears over taxes and a lack of regulatory clarity, alongside relentlessly rising costs.
Meanwhile two thirds of businesses (66%) said they had already or will be reducing headcount. Three quarters (74%) of businesses have had to pass on some costs to consumers and over a quarter (26%) are no longer creating new roles.
They survey also found that almost a third (29%) of companies had reduced or cancelled plans to invest in the UK to cover the increases in costs.
The massive slump in morale comes after a big fall following last year’s budget, but FDF chief executive Karen Betts said companies were entering the crucial run up to the festive season with confidence at rock bottom.
“This report captures the mood of our sector and as we enter Christmas trading,” she said.
“The combination of tax rises in the last budget, increasing costs like EPR, and policy uncertainty makes for a tough business environment. What’s more, food companies can readily see how impacted shoppers are by continued food price inflation and how careful households are being about spending in the run up to Christmas.
“We fully support the government’s stated ambition for economic growth, and as the UK’s largest manufacturing sector and pillar of the ‘everyday economy’, we want to partner with government to make this happen.
“There are huge productivity gains to be made in our sector, alongside work to be done to improve environmental sustainability and healthy options. But we need a simpler, stable regulatory pathway if this is to happen, and one that operates across government. And real reform of the unnecessary and out of date regulations that tie companies down and cause opportunity costs.”
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