Food and drink manufacturers face ‘sluggish growth’

The total number of workers in the sector could fall 0.2% this year, and 0.8% next year, according to EEF’s second quarter survey, published today (June 5). The fall in workers would follow a 0.8% rise in food and drink manufacturing jobs last year.

An EEF spokesman told FoodManufacture.co.uk: “Part of the reason in the forecast for sluggish growth for the sector, especially in view of the squeeze on household incomes and therefore consumer spending, is the drive for automation. ​

“The increase in the National Living Wage, as well as the large presence of EU workers in the sector, mean that manufacturers are looking to automate to keep overheads low.”​

An extra 140,000 workers needed​

EEF’s forecast came despite the Food and Drink Federation claiming the food and drink sector would need an extra 140,000 workers by 2024, to replace retiring workers.

The sector was also predicted to sell 0.1% more products this year, despite challenging trading environments, EEF said.

EEF’s report said: “The ​[food and drink] sector has already seen output growth stall over the past few months, and the squeeze in household incomes will weigh on a sector which is also grappling with a sterling-induced rise in input costs.​

“What’s more, the sector’s low export-intensity means most manufacturers will be unable to offset softer domestic demand with higher export sales. Nevertheless, the relatively demand inelastic nature of food and drink products should see the sector narrowly avoid a contraction in output for this year and grow by 0.5% in 2018, as the drag from inflation on consumer spending starts to fade.”​

Overall, the EEF survey revealed positive trends across UK manufacturing. An increase in exports delivered a “surge in performance”​, it said.

‘Surge in performance’​

Growth in the manufacturing sector was expected to rise by 1.3% this year, and 0.5% next year, EEF revealed.

EEF chief economist Lee Hopley said: “Our survey marks another quarter of positive news about growth prospects for UK manufacturers. It’s very encouraging that UK manufacturers have positioned themselves to capitalise on the windfall of a competitive pound and resurgent world economy.​

“While growth and confidence hasn’t been knocked off-track by the snap election, it is not plain sailing from here. There is the continuing challenge of managing input cost increases; ensuring success in attracting and retaining the skills that are in increasing demand and driving up investment in the sector.”​

Meanwhile, last month professional services group PricewaterhouseCoopers claimed 1.22M manufacturing jobs were at high risk​ from the introduction of robotics and artificial intelligence.