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Business Confidence

The FDF Business Confidence Survey showcases the current economic views of FDF members on a quarterly basis. Find out more about our most recent survey results.

Latest report: Q3 2019 Food & Drink Business Confidence Report

FDF conducted its third quarterly business confidence survey of 2019 between 23 September – 11 October. The survey gauges how business sentiment evolved across the food and drink manufacturing sector in Q3 2019, in comparison to previous quarters.

We received responses from businesses with a combined turnover of approximately £6 billion [1], located across all regions and nations of the UK. Almost two thirds of these responses were from small and medium-sized enterprises (SMEs). It is important to note that responses were received from parent companies on behalf of their subsidiaries, and so the actual number of businesses represented is an underestimate.

Q3 2019 Economic Background

• Despite a strong start to 2019, the sector has seen a quarter of weak overall performance. While output growth figures for early 2019 were positive (3.5% on average), these have entered negative territory since June, averaging -0.5% over recent months [2].
• This decline supports evidence from members that early 2019 output and export growth was significantly inflated by impacts of stockpiling. 45% of respondents also forsee UK exports decreasing over the remainder of 2019 [3]. View the FDF analysis of official export figures.
• While jobs have been on an upward trajectory since early 2014, recent years have seen volatility. For instance, the industry has seen a 7,000-person decline between Q1 and Q2 2019, the largest quarterly decline since Q1 2018 [4].
• Access to workers is a consistent concern for members; our most recent results indicate that 42% expect the UK's permanent labour supply to decline over 2019, and almost 90% predict a fall in temporary labour supply. Members looking for information to support their EU workers in preparation for Brexit can find more information via the Brexit Food Hub. FDF has also recently published Preparing for a Changing Workforce on behalf of the Food and Drink Sector Council, which outlines early priorities the industry's workforce and skills needs

Q3 Confidence Snapshot

Do you believe that general business conditions this quarter compared to last quarter have...? [5].

2019 Food Prices

• Input prices continue to be a key concern for manufacturers, with over half reporting increased ingredient costs in Q3 and 81% predicting further increases for the rest of 2019. This is expected to continue to act as a barrier to success in 2019 according to 61% of businesses.
• Overall food and non-alcoholic beverage inflation has risen by 0.9% since January 2019 [6] , compared with a 0% rise over the same period in 2018. Moreover, both input and output prices have increased for both the agriculture and sectors over the last decade.
• The relative spike in prices post-EU referendum has been pronounced, and trends show that manufacturing [7] input prices have grown at a faster rate than output prices since late 2016. This indicates that manufacturers may have been forced to take a hit on margins to avoid price increases passing through to consumers.
• At the same time, compared with early 2018, the gap between the growth rate of agricultural ingredient input and output prices has narrowed , as shown below. According to the Department for Environment, Food and Rural Affairs (Defra), the fall in output prices has largely been driven by cereals and potatoes. This aligns with widely-reported lower yields across the UK and Europe due to extreme weather conditions. In addition, inputs such as plant protection products, energy and fertilisers have all seen a price rise, which has contributed to the overall increase in input prices.

Food and Drink Net Confidence

Since FDF began reporting in Q1 2018, net confidence has declined by 20 percentage points [8].

Q2 Key Impacts

What impacts has your business experienced in the last quarter? [9]

2019 Top 5 Opportunities & Risks

Members ranked the top factors which are considered to be opportunities and risks:

Opportunities

• Increased domestic demand
• Planned investment in new machinery
• Increased certainty over future EU relationship [10]
• Increased export demand
• Planned investment in new product launches

Risks

• Exchange rate volatility
• Ongoing political uncertainty
• UK import tariff uncertainty
• Possibility of a 'no-deal Brexit'
• Cost of ingredients

2019 UK Outlook

• Net confidence remains negative, indicating members' pessimism about business conditions. In Q3, almost half of respondents were still reporting declining product margins.
• Official data indicate that investment has fallen significantly compared to 2018, with a 69% drop in business investment in Q2 2019 [11]. Economic uncertainty inhibiting investment is a concern going forward for over a third of businesses, as well as ongoing political uncertainty (65%) which also significantly impacts confidence when making investment decisions.
• Positively, 68% feel that domestic demand will be an opportunity for the remainder of 2019 (an eightpercentage- point increase on Q3 2018).
• As reported in Q2, all of the top five risks for 2019 were Brexit-related. These included the possibility of no-deal Brexit, exchange rate volatility, cost of ingredients, UK import tariff uncertainty, and ongoing political uncertainty.
• While political uncertainty was previously lower on the list of perceived barriers, this is now the second highest concern after exchange rate volatility.

Brexit Preparedness

• The UK was granted its third Brexit extension in October, with the date now pushed back from 31 October 2019 to 31 January 2020. Food and drink manufacturers have already spent millions of pounds preparing for a nodeal exit three times in the last 12 months and will now be hoping that some clarity on the Brexit process will present itself once a new Government is formed.
• When asked about their no-deal expenditure over the last year, 56% said they have spent up to £100k, while more than a quarter have spent over £100,000 on nodeal Brexit preparations. Some respondents reported spending of up to £3 million.
• Businesses were also asked whether they are satisfied that government information and guidance is sufficient to ensure preparedness for a possible no-deal Brexit, to which 62% are dissatisfied or extremely dissatisfied.
• Positively, many members noted that trade associations such as FDF have been vital in informing industry on how best to prepare for the possibility of a 'no-deal' Brexit.

For further information on FDF's Brexit guidance, please contact brexit@fdf.org.uk.

2019 Views on the Wider Economy

Does your business expect the following to increase/remain the same/decrease in 2019? [9]

Download full results

Q3 2019 Food & Drink Business Confidence Report

Notes
1 This is an estimate calculated using mid-points of turnover brackets and as such is likely to be a lower-bound estimate.
2 Source: ONS, Index of Production. Figures represent (monthly) chained volume indices of gross value added, and are calculated from seasonally-adjusted indices (2016=100).
3 Results are expressed as a percentage of respondents to specific questions. Response rates can vary from question to question.
4 Source: ONS, Employee jobs by industry (not seasonally-adjusted).
5 Combined figures may not equal 100% due to rounding.
6 Source: ONS, Consumer price inflation time series (2015=100).
7 Source: ONS, Producer price indices (2010=100). Estimates include food, beverages and tobacco.
8 Net confidence figures are calculated on a quarterly basis, and are dependent upon sample size which varies from quarter to quarter. Our Q3 2019 survey received 33 responses.
9 Results here are expressed as a percentage of respondents, and do not represent the scale of increase for each category. Response rates can vary from question to question.
10 If a deal is secured with the EU which meets manufacturers' needs, and this deal is ratified by the UK Parliament.
11 Source: ONS, Business investment by industry and asset. Calculated using seasonally-adjusted chained volume measures (reference year 2016) for manufacture of food, drink and tobacco.

Previous reports

Download the Q2 2019 Confidence Report

Download the Q1 2019 Confidence Report

Download the 2018 Confidence Report

Download the Q3 2018 Confidence Report

Download the Q2 2018 Confidence Report

Download the Q1 2018 Confidence Report