According to the Food and Drink Federation’s (FDF) latest business confidence survey, over a third (38%) of food and drink manufacturers are reporting an increase in costs as a result of stockpiling ahead of a possible ‘no-deal’ Brexit.
The survey also revealed that economic uncertainty has seen net confidence among food and drink manufacturers decrease by 21 percentage points between Q3 and Q1 of this year.
Two-thirds of the businesses FDF surveyed identified future tariff implications as a risk to their business. Just under 60% of businesses surveyed thought business investment across the overall UK economy would fall in 2019, while more than 96% expected to see rising input prices.
Retail market consolidation was one of the top three barriers expected to impact the success of SMEs, which make up 97% of the UK’s food and drink manufacturing sector. This follows the recent takeovers of Booker by Tesco, Nisa by the Co-op, and the proposed merger of Sainsbury’s and Asda, which present significant concerns for UK manufacturers.
The survey also reported that business conditions for food and drink manufacturers had been difficult this year, in part due to the fall in the value of sterling, which has contributed to increased costs of ingredients and raw materials. More than three-quarters (79%) of respondents reported increased ingredient costs as the biggest impact on their businesses in Q3, while 71% of those polled cited increased packaging costs.
Ian Wright, FDF chief executive, said: “These results tell us just how seriously the food and drink industry, the UK’s largest manufacturing sector, takes a ‘no-deal’ Brexit. It is a grisly prospect to which we edge closer every passing day.
“The Budget announcement from the Chancellor – with measures to support productivity, exports, enterprise and investment – offers some respite for our SME food and drink manufacturers.”
Wright also warned about costs associated with new plastic packaging tax. “But there is significantly increased worry across the sector following the announcement of the Chancellor’s new tax on plastic packaging,” he added. “This will undoubtedly place many more financial burdens on UK food and drink manufacturers – that loads on cost at a time when just under three-quarters of our members report that their packaging costs are increasing. The storm clouds are gathering.”