Insolvencies in food and drink manufacturing have soared in the past year as surging cost inflation and falling consumer spending squeezed firms across the industry.
Failures at manufacturers jumped more than 250% in the year ended 31 January 2023 as 143 businesses collapsed, compared with just 39 in the prior 12 months, according to research from financial services firm Mazars.
Food and drink companies are struggling to stay afloat as they face soaring energy costs, supply chain disruptions and reduced consumer spending, alongside higher raw material prices in the wake of the war in Ukraine.
Own-label juice supplier Orchard House Foods shut up shop in the past year, leaving more than 600 workers out of a job, while long-standing family business Singleton’s, which supplied dairy products to the likes of Sainsbury’s and Morrisons, also entered insolvency.
Mazars said manufacturers have increasingly come into conflict with their supermarket customers as they try to pass on costs in the form of higher prices.
The firm added that, at the same time, higher prices resulted in shoppers buying less and affecting sales at the manufacturers, further squeezing margins.
“There has been a sharp rise in food and drink manufacturers coming to the edge of the financial cliff as their costs continue to rise,” Mazars partner Rebecca Dacre said.
“Consumers have traded down and even cut overall consumption of food and drink.
“A downturn in inflation couldn’t come too soon for the industry.”
Insolvencies among food manufacturers increased 255% from 20 to 71 in the past year, while failures of drinks producers rose 279% from 19 to 72 over the same period, according to Insolvency Service figures analysed by Mazars.
“Manufacturers of food and drink are always hit hard when agricultural prices rise and the last year has seen many of those prices surge. Some of those businesses will be pushed into insolvency as a result.”
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