Food, drink manufacturers holding back investment amid challenging environment

Food and drink manufacturers have been reining in their investment plans due to concerns about market volatility, states a recent market report.

According to latest ‘State of Industry’ report from the Food & Drink Federation (FDF), food and drink manufacturers have used a variety of ways to shield consumers from the full impact of these increases, including reducing production and freezing recruitment, despite being faced with higher costs related to Brexit, the pandemic, and the war in Ukraine.

The FDF report notes that this approach has led to vital infrastructure and innovation projects being halted or postponed, which is likely to have a negative impact on long-term productivity and jobs.

“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.

“The industry’s significant labour shortages are forcing some companies to restructure their businesses, leave vacancies unfilled and reduce production – all of which contributes to rising wage bills and hampers growth, which is vital for a strong economy.

“Building a sustainable and resilient food supply chain which supports the economy requires sustained investment to drive technological advancements and innovation. If the government can create a stable and positive business environment, the UK’s largest manufacturing sector, is ready to play its part in driving the productivity growth that our country needs.”

Despite the challenging landscape, the FDF found that business confidence is starting to move in a more positive direction, climbing 17 points in the last period to -30. 84 per cent of respondents expect production levels to maintain or increase over the next year, reflecting a growing belief in the industry’s resilience and ability to adapt.