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: 2018 Food & Drink Business Confidence Report

FDF conducted the fourth of its quarterly business confidence surveys between 21 January - 4 February 2019, in order to gauge how business sentiment has evolved across the food and drink manufacturing sector over Q4, and 2018 more widely.

We received responses from businesses with a combined turnover of approximately £12.7billion [1]. Over half of the responses came from small and medium-sized enterprises (SMEs).

2018 Economic Background

  • The food and drink manufacturing sector has seen a year of mixed performance, according to official government data and data from FDF's quarterly business confidence surveys.
Key indicators
Official Food and Drink Indicators[2] Growth % change
Wages[3] 0.02% (Q1– Q3)
Investment[3] 9.2% (Q1– Q3)
Gross Value Added (GVA) 2.8% (Q1– Q3)
Food & Soft Drink Inflation -0.3% (Q1– Q3)
Net Confidence -32pp (Q1– Q3)
Output[3] 1.7% (Q1– Q3)
Exports 18.4% (Q1– Q3)
  • Since the start of 2018, net confidence has decreased by 32 percentage points [4]. Across all four quarters, increased packaging and ingredient costs were reported as the two biggest impacts on businesses. In each quarter, 61-79% of respondents said that these two input costs had increased on the previous quarter5. Falling profit margins were also highlighted by members on a quarterly basis, especially in Q4 when 55% of respondents stated that they had felt this impact.
  • On a more positive note, almost half of Q4 respondents (46%) quoted an increase in UK sales volumes compared with Q3, representing a 24% increase from Q1 in the number of reports [5]. When asked to look ahead, increased domestic demand was consistently identified as an opportunity, with a 6.3 percentage point rise in the proportion of respondents highlighting this in Q4 compared to Q1 [5].
  • Views around barriers remained fairly stable over 2018, with increased ingredient costs unwaveringly being reported as the top forward-looking obstacle (41-86% respondents in each quarter [5]). Exchange rate volatility has also been raised as a key concern by members, with 44% of respondents identifying this as a (forward-looking) hindrance in Q1, increasing to 77% in Q4[5]. This is illustrative of the perceived risk associated with the uncertainty over the UK's post-Brexit relationship with the EU, as well as what the transition period and potential contingency measures may look like. As the threat of a 'no-deal Brexit' becomes more tangible, businesses appear to be increasingly concerned that this will impact their business in 2019, as echoed by 82% of respondents to our Q4 survey.
  • A new concern for members in Q4 was export profitability, highlighting the pressure that members are under across all parts of their business. This is in line with continued concerns over input prices. For instance, 93% of respondents now predict rises in input prices in the wider economy over the course of 2019, compared with 66% in Q1[5].

Confidence Snapshot [5], [6]

Do you believe that general business conditions in Q4 2018 compared to Q3 2018 have...?

Q4 Key Perceived Impacts on Food and Drink Businesses [7]

Key Business Impacts of Brexit

  • Given the increasingly weak level of business confidence in the food & drink sector as the UK's withdrawal from the EU approaches, it is vital that the right support is provided to ensure the success of the sector going forward.
  • In line with concerns over the risk of a 'no-deal Brexit', the majority (84%) of businesses (96% of large business, and 72% of SMEs) stated that they have made a forward commitment to no-deal Brexit planning [8].
  • Over three quarters of businesses that have set aside funds for no-deal planning reported having allocated up to 5% of their UK turnover [8].
  • As well as committing funds to no-deal contingency planning, 74% of large businesses have deployed staff for no-deal Brexit roles specifically, with the majority reporting the allocation of at least 1-10 staff. SMEs justifiably have a different approach to this issue, with only 24% able to assign staff to Brexit planning roles [8].

2019 Views on the Wider Economy [6]

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

2019 UK Food & Drink Manufacturing Outlook

  • Looking ahead to 2019, businesses have also expressed concerns over labour availability, especially temporary labour supply (79% of respondents in our Q4 survey foresee general availability of such workers in the wider UK economy falling over 2019).
  • Given the increasing risk of a 'no-deal Brexit', businesses' views on growth showed convergence over the course of 2018. In the first quarter of 2018, less than a third of respondents felt that economic growth would decline when asked to look ahead. This subsequently rose significantly, with almost 3 times as many businesses in Q4 (61%) compared with Q1 predicting that economic growth will decline in the coming year[5].
  • Sentiment around interest rates fluctuated in 2018. Members indicated a largely hawkish stance in Q1 and Q3, whereas in Q2 and Q4, respondents were more divided as to whether interest rates were likely to rise or remain the same in the near future [5]. Although a lower proportion (and number) of respondents in Q4 than Q3 felt that interest rates will increase in 2019, the overall view on business investment deteriorated towards the end of 2018, with 69% of respondents (in Q4) expecting investment to decline in 2019 [5].

Top 3 Opportunities & Risks for 2019

Opportunities:

  • Increased domestic demand
  • Increased demand for healthy food products
  • Planned investment in new product launches

Risks:

  • Increased cost of ingredients
  • Risk of 'no-deal Brexit'
  • Exchange rate volatility

Notes
1.This is an estimate calculated using mid-points of turnover brackets. As such this is likely to be a lower-bound estimate.
2 Sources: The Office for National Statistics and Her Majesty's Revenue and Customs, with the exception of Net Confidence, which is calculated from data collected by FDF.
3 Estimates here are for the combined activity of food, beverage, and tobacco manufacturing.
4 Net confidence figures are calculated on a quarterly basis and are dependent upon sample size (which varied from quarter to quarter in 2018).
5 Number of respondents, and hence sample size, varied from quarter to quarter over 2018. Our Q1 survey received 45 responses; this figure rose quarter-on-quarter, reaching 61 in Q4.
6 Results here are expressed as a percentage of respondents.
7 Results here are expressed as a percentage of respondents to our survey and do not represent the scale of increase for each category.
8 Results here are expressed as a percentage of respondents to these specific questions.
9 Results here are expressed as a percentage of respondents to our survey.
+ Sources: The Office for National Statistics and Her Majesty's
Revenue and Customs.

Previous reports


Last reviewed: 25 Feb 2019