Final figures from the Business Confidence Survey 2011, carried out by the Food and Drink Federation (FDF), revealed that the sector's businesses had “remained resilient” despite the tough economic climate, with over 70% of respondents reporting sales increases for the first quarter of last year.
Sales for the latter half of the year slowed but still continued to grow, the FDF revealed.
Angela Coleshill, director of competitiveness at the FDF, said: “Food and drink manufacturing has remained strong as the result of flexibility and forward thinking by our sector companies, ranging from small- and medium sized enterprises to the biggest global brands.
“Manufacturers have continued to invest in facilities, people and new product development to take of advantage of emerging trends that were confirmed in 2011 including our strengthening export potential and significant consumer interest in healthier products.”
Her comments were echoed by Chilled Foods Association secretary general, Kaarin Goodburn, who described the sector as the “last secure industry”. She added: “Everybody needs to eat. It’s no surprise.”
Despite the strong performance, the sector was “hit hard” by increased costs, driven largely by rising fuel and material costs, according to the FDF.
This was a result of oil price spikes after political unrest in the Middle East. But while many manufacturers were forced to pass on price rises to cover costs, many firms are believed to have deferred increases to avoid jeopardising their position with retailers.
The FDF also confirmed that investment centred largely on new product development (NPD), but uncertainty over the economic outlook and consumer confidence led some firms to scale back their original plans.
In addition, capital expenditure remained “fairly low”, apart from a surge in the third quarter of the year. However, reduced bank lending meant that capital projects remained unfulfilled for many firms, the survey revealed.
In contrast, research and development (R&D) investment grew, with research from financial specialist Grant Thornton confirming that 8,500 new product variants were registered in the UK last year.
This was up from 8,000 in 2010 and places the UK second in the world for NPD behind the US, according to the FDF.
The news comes after agriculture minister Jim Paice confirmed the importance of the sector as the country battles to restore economic stability.
Speaking in February, Paice said: “I firmly believe food manufacturing can play a key role in Britain’s economic recovery. That’s why I’m backing British products abroad while ensuring business gets the right support at home.”
He restated the news at the Foodex trade show last month after it was revealed that UK food and drink exports last year had topped the £12bn barrier.
In an interview with FoodManufacture.co.uk, Paice further stressed the importance of the sector for the wider economy but revealed that there was still “more work to do”.
To watch the interview, click here.