Large food businesses are feeling their most confident in a decade with profits on the up and more growth expected, a survey by consultancy firm BDO has found.
BDO surveyed 100 UK food and drink manufacturers with a turnover of between £10m and £300m, finding 95% feel confident about the prospects for their business. This is up from 70% a year ago.
This isn’t just blind optimism, said BDO, with almost two-thirds of respondents seeing orders increase in the past 12 months. This helped 41% to increase their profitability, and more than half are now expecting a further boost in the coming year.
Cindy Hrkalovic, head of food and drink at BDO, said to understand why the sector is upbeat, recent history must be considered.
Recent shocks such as global pandemics and market disruption have caused the insolvency rate of food and drink companies to double in the last five years, she said, “in other words – companies that were not set up to endure hard times have fallen by the wayside”.
Those that remain will have tightened their finances, toughened their supply chains, and generally tweaked their business models to withstand further pressures, she added. “They will certainly face more challenges in the months to come – but having got this far, they could be allowed a modicum of confidence.”
The survey suggested the sector is now gearing up for growth, with a third of companies expecting the biggest driver to be expansion into new EU markets. Despite the recent trade deal between the UK and Brussels, BDO said this is more due to increasingly protectionist measures in the US than smoother trade across the Channel.
M&A is expected to be less of a factor, although 54% of companies are still looking to make acquisitions in the next year. Rather than sales, however, a key driver of this is to meet sustainability goals, with 44% looking to buy assets that could enhance their ESG propositions.
While businesses inevitabily raised concerns over threats such as regulation and pricing pressure, “what is perhaps most notable is the lack of any one overriding concern”, said BDO. The most cited risk – availability of and access to finance – was only mentioned by one-fifth of respondents.
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