The number of food and drink businesses in the UK that went into administration during the first half of 2023 is more than double the amount seen during the same period a year ago.
In total, 56 food and drink businesses went into administration during H1 of 2023. This is compared to a total of 53 for the entirety of 2022.
Meanwhile, food and drink businesses make up 9% of total UK administrations this year.
Kroll managing director Ben Wiles said that the trend of food and drink business facing administration was an “interesting development” that is not necessarily inline with past administration trends.
“Many of these companies are highly leveraged due to the hangover of Covid and are also affected by higher inflation and energy costs,” Wiles added.
“When you factor in higher borrowing costs and a lack of working capital, it’s proving tricky for businesses in this sector.”
More business failures to come
Corporate finance director at Rollits Julian Wild told Food Manufacture that the increase in administrations has been caused by a combination of factors off the back of Brexit and Covid.
“There has been a dramatic increase in input costs for all food and drink businesses – raw materials across many categories have increased in cost significantly,” Wild said.
“Labour is hard to find, particularly in production, logistics and technical, so wages have gone up; overheads, especially energy and fuel, have increased substantially.”
Looking at the food and drink industry’s prospects for the rest of 2023, Wild predicted that more high-profile names could be at risk.
“I don’t see any great change in the next six to nine months as interest rates continue to increase and I am sure we will see more business failures, possibly among some better-known names than we have already seen,” Wild added.
In other news, staff at KP Snacks are threatening strike action after receiving a “below inflation” pay offer.