‘Food, drink makers remain confident amid pressures’

Most leaders and stakeholders in the UK food and drink sector feel positive about the prospects of the industry over the coming year, a recent report has stated, however adding that some pressures remain, including the twin threats of higher energy costs and constraints on consumer spending.

According to BDO’s annual Food & Drink Report, there is still a high degree of optimism among food and drink manufacturers. Although down slightly on last year (78 per cent), 70 per cent of respondents are feeling positive about the future of their own business in the next 12 months. This is buoyed by the jump in optimism for the sector overall, which has increased from 69 per cent in 2022 to 81 per cent.

Over a third (40 per cent) expect an increase in their gross profit margins over the coming year and, as the buoyant mood continues, a further quarter (24 per cent) are planning acquisitive purchases. Almost a third (30 per cent) stated that new product development will be a key driver for growth across the next 12 months, whilst 29 per cent said expanding in non-European Union (EU) markets is a key focus.

Despite the confident outlook, BDO’s survey highlights the myriad of challenges businesses in the sector are facing.

Half (50 per cent) of the respondents reported difficulties in recruiting the people they need, with engineering and project management or production-related roles the hardest to fill. Almost two-fifths (39 per cent) of those experiencing recruitment challenges believe skills shortages are worse now than before Brexit and the pandemic.

Digital transformation remains a key area of investment to boost productivity and gain competitive advantage. The majority of respondents stated that their executive teams recognised the importance of this. However, 60 per cent feel they were falling behind on their digital transformation journeys. In addition, 28 per cent said they are taking on higher levels of debt to counteract inflation.

The Ukraine conflict continued to affect 65 per cent of businesses in the BDO survey. Meanwhile, overly complicated import-export rules were flagged as key reason for hampering trade. Almost two-thirds (63 per cent) stated that they are finding it hard to trade with Northern Ireland via the Trader Support Service, with a further 69 per cent struggling to use preferential origin under the UK’s Free Trade Agreements.

“After enduring Brexit, Covid-19, supply chain disruption and a cost-of-living crisis brought on by a war in Ukraine, food and drink businesses should be applauded for the resilience and adaptability they have demonstrated,” said Cindy Hrkalovic, Head of Food and Drink at BDO.

“However, the long-term nature of many of the threats facing UK food and drink companies suggests that leaders will need to stay flexible and think strategically about the future of their businesses. Sticking-plaster measures from businesses or government will not suffice in an environment where a return to normality – whatever that is – remains elusive.”