Confidence at food makers improved in the golden quarter of 2025 but remained subdued as the industry battled rising production costs, a new report has found.
Over the crucial Christmas trading period, confidence at manufacturers was still stuck in negative territory of –31%, according to the FDF’s latest State of Industry report. It represented a significant bounce on the –60% trough recorded in the third quarter of last year as the uncertainty leading up to the government’s autumn budget lifted.
However, the FDF said the fact confidence was still negative suggested the Chancellor had not done enough to restore faith with concrete measures to stimulate growth.
This was particularly the case among smaller producers, as half reported conditions for businesses in the fourth quarter were worse than the previous three-month period. Similarly, 45% of mid-sized businesses agreed conditions deteriorated in the golden quarter.
Production costs – including energy, ingredients and labour, as well as regulatory pressures such as the extended producer responsibility packaging tax – rose on average by 4.4% over 2025 for food manufacturers, rising to 5.3% for small businesses, which restricted the latter’s ability to invest in efficiencies.
Despite these challenges, the State of Industry report revealed there was still appetite for growth among SME manufacturers. Two-fifths are looking to grow sales in foreign markets, and just more than two-fifths were planning to increase investment in machinery in 2026, hinting at ambitions to modernise and automate factory processes.
However, with consumer confidence matching low business confidence, companies would have little opportunity to recover the impact of rising costs, the FDF added.
The membership body urged the government to match industry’s ambition and back the growth potential of food & drink’s most innovative businesses with the right support to drive productivity and sustained growth. The call included ensuring, as the UK’s largest manufacturing sector, food & drink received a fair share of government R&D funding and was not overlooked in support for energy-intensive industries.
“UK food & drink manufacturers are 97% small and medium-sized businesses – ambitious, agile and innovative businesses,” said FDF CEO Karen Betts. “Government shouldn’t underestimate their potential to drive jobs and growth. We’ve set out a blueprint of practical measures to unlock £50bn worth of growth but are yet to see any of these actioned by government.”
The FDF added the government should support SME manufacturers’ global ambitions with targeted help with exporting.
“UK food & drink is popular globally, known for its quality, creativity and innovation,” Betts said. “Setting the conditions for success here at home while growing those exports is a win-win for government, industry and communities up and down the country. The right government measures will pay dividends in business confidence, investment, productivity and growth.”
The government should also maintain its commitment to put any upcoming policy (including proposals to change the nutrient profiling model) through an ‘inflation Gateway’ to assess what the impact would be on driving up production costs for food businesses, the FDF added.
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