Inflation GettyImages-1011310720

The inflation crisis is threatening to have a negative impact on investment in vital infrastructure and innovation projects, food and drink companies have warned.

The FDF’s latest State of Industry Survey of its members, published this week, claims food companies have been forced to put aside investment in new products, manufacturing technology, staff development and energy efficiency.

Despite innovation coming top of the list of the list of priorities for growth, the survey, which covered FDF members ranging from small companies to those with turnover in excess of £1bn, found nearly 70% of companies said they expected investment on it to fall or remain unchanged in the coming year.

Inflation by category, April 2023


Source: ONS

Percentage of businesses stating they absorbed costs


Source: ONS, Business Insights and Conditions Surveys

The FDF said food and drink manufacturers had been more exposed than other sectors to the impact of soaring costs, and that while the latest figures showed food inflation had reached its peak, its impact would be felt for months to come.

It cited ONS figures that showed on average, in the year to February, 72% of manufacturers absorbed a share of rising costs, compared with 56% of all UK businesses, 53% of retailers and 64% of those in hospitality.

“Because of high cost pressures and a challenging regulatory environment, many food manufacturers have had to cancel or pause investment projects over the last year as they absorb as much of the soaring costs as possible, to avoid passing them on to struggling households during the cost of living crisis,” said FDF director for growth Balwinder Dhoot.

Growth by sector in Q1 of 2023


Source: ONS, GVA, chained volume measures

The federation renewed calls for ministers to remove pressure from additional regulations within the Windsor Framework and shelve “poorly designed” recycling initiatives such as EPR, which it said would further drive up prices.

“If the government is serious about driving down inflation it must actively engage with the food and drink sector on these issues,” added Dhoot.