Food companies scaling back growth plans as costs rise by up to 10%

Food and drink business have been massively scaling back growth plans as confidence remains at rock bottom, a new survey by the FDF reveals.

Data for the first quarter of 2025 shows 41% of food and drink manufacturers have slashed their plans for investment over the period.

Confidence has flatlined, remaining at a level almost as bad as reported in March, when the FDF revealed there had been a drastic slump from –6% in the third quarter to a disastrous –47% in quarter four, the worst result since the inflation crisis at the end of 2022.

The FDF said today the confidence factor remained desperately low, sitting at –43% for the first quarter of 2025.

The report also revealed production costs had increased by an average of 4.5% over the year to March 2025, with over a fifth (22%) of food and drink manufacturers having seen costs increase by 10% or more.

Energy, ingredients and labour prices were all cited as costs which were continuing to climb, while manufacturers expect their costs to rise by a further 4.8% in the next 12 months.

Further action needed

The federation said the government’s recent announcements of landmark trade deals with the US and India were “steps in the right direction” which it hoped would strengthen competitiveness in othe sector.

But it said ministers needed to take further action to strengthen national food security, protect consumers from rising prices and enable manufacturers to invest in new healthy products.

It included continuing to push for a reduction in the current 10% tariffs imposed by the US, while continuing to strengthen ties with the EU.

“It’s concerning that businesses are having to scale back investments that would help drive long-term growth and productivity as they ride out a wave of cost rises,” said FDF director of industry growth and sustainability Balwinder Dhoot.

“The government must reflect the value that food and drink manufacturing has to our country by ensuring growth for our industry is a top priority in its upcoming industrial and food strategies. We urge government to give businesses the support they need to make investments that will support the resilience of the food industry.”