News article

30 October 2018

Food and Drink Federation: More than a third of food and drink manufacturers facing increased costs as a result of 'no-deal' Brexit stockpiling

The Food and Drink Federation's (FDF) latest business confidence survey reveals that over a third (38%) of food and drink manufacturers surveyed are reporting an increase in costs as a result of stockpiling ahead of a possible 'no-deal' Brexit.

With less than five months to go until the UK is scheduled to leave the European Union (EU), FDF's quarterly surveys have shown a significant decline in business confidence amongst food and drink manufacturers during 2018. Economic uncertainty has seen net confidence amongst food and drink manufacturers decrease by 21 percentage points when comparing results reported in Q1 with those reported in Q3.

When looking ahead to 2019, two thirds of businesses FDF spoke to 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% expect to see rising input prices.

For SMEs, who make up 97% of the UK's food and drink manufacturing sector, retail market consolidation was one of the top three barriers expected to impact the success of their business in 2019. 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.

Business conditions for food and drink manufacturers have been especially 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 businesses FDF spoke to reported increased ingredient costs as the biggest impact on their businesses in Q3, while 71% of those polled cited increased packaging costs.

Ian Wright CBE, 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.

“Yesterday's announcement from the Chancellor - with measures to support productivity, exports, enterprise and investment - offers some respite for our SME food and drink manufacturers.

“But there is significantly increased worry across the sector following the announcement of the Chancellor's new tax on plastic packaging. 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.”

Notes to editors:

Read FDF's Confidence Survey
FDF conducted this quarterly business confidence survey between 19th September – 8th October 2018 to gauge confidence levels in the food and drink manufacturing sector in Q3 2018.
FDF received responses from businesses with a combined UK turnover of approximately £11.4 billion, equivalent to 12% of the food and drink manufacturing sector total turnover. Almost two thirds of the responses came from small and medium-sized enterprises (SMEs).
View FDF's response to the Autumn budget
FDF has now entered formal negotiations with both BEIS and Defra around an ambitious Food and Drink Industry Sector Deal, which will provide vital stability to our sector when it is finalised. We hope it will support innovation, encourage the development of skills and look to boost trade, while ensuring our sector makes much-needed productivity gains. The Food and Drink Industry Sector Deal proposals were formally put forward by the Food and Drink Sector Council. FDF is actively supporting the work of the Food and Drink Sector Council.