Sustainable Growth in the Food and Drink Manufacturing Industry
A Grant Thornton report commissioned by Food and Drink Federation.
The report concludes that the food and soft drink manufacturing industry (FDM)
can generate
sustainable growth and contribute to the UK economic recovery by building on
its
strengths and minimising its
weaknesses. However, the industry will only be able to achieve this if it
operates in a supportive regulatory environment which incentivises business
investment and
nurtures British food and drink manufacturers.
In many cases, to remain competitive the role of the Government in optimising
growth is seen as a necessary requirement by those in the industry.
Working in partnership with government
FDF has been working in partnership with Government on a number of key
initiatives. 
These include a new food and drink export forum jointly chaired by
Defra
Food and Farming Minister Jim Paice and FDF Deputy President Paul Grimwood; the
development of a skills action plan to attract talented young people into the
industry and, at the invitation of the Business Minister Mark Prisk, an
industry
showcase.
The food and drink manufacturing showcase was held in November 2011 at the
Business Innovation and Skills headquarters in Victoria Street. It was one of a
series of events to highlight British manufacturing and FDF was proud to
highlight
the work of the sector to around 3,000 visitors to the department.
Foreword
Message from FDF President Jim Moseley
Food and drink manufacturing in the UK is a Great British success story. By
contrast with many of the UK's traditional industries, we have shown resilience
and
resolve to grow and adapt: increasing our exports in each of the last six
years,
reducing our environmental footprint, providing job opportunities over a range
of skills and levels and developing healthier products, while continuing to
deliver value and choice to our customers.
This has not been easy. Businesses have dug deep to reduce costs and become more
efficient, as well as to cope with a range of external factors from new
regulation to extreme volatility in commodity prices.
The way ahead is just as demanding. We know we are going to have to produce
more, from less and with less impact in order to meet the twin challenges of
food
security and climate change. And we know that simply improving our efficiency
will
not automatically guarantee our future competitiveness – even though it is a
vital pre-condition. It is also clear we need innovation and investment – and a
better understanding of the limits and barriers to our growth potential in a
global
context.
So we decided to ask Grant Thornton to help us in this task by conducting an
independent research project into what FDF members really think are the threats
and
opportunities they face – and who needs to do what about them.
The research findings constitute a powerful case for our industry to be central
to the UK's economic recovery whilst continuing to make a real and unique
difference to a more sustainable future for society and to individual health
and
wellbeing. With the right entrepreneurial approach on the part of business, and
the
right operating framework from Government, working together we believe we can
fulfil our vision to achieve a 20% increase in sustainable output by 2020 –
provided that we work in genuine partnership with the shared strategic
objective
of
ensuring safe, nutritious and affordable food for all.
A number of excellent initiatives are already in place, from us, from Government
and as joint projects. But more needs to be done – this report justifies our
belief that we should be ambitious in our aspirations for what the food
industry
can achieve. That is our 20/20 vision for the future.
Sector overview and contribution to the UK economy
The food and soft drinks manufacturing industry (FDM) is the largest
manufacturing sector in the UK and contributes substantially to the UK economy.
The latest available figures show that in 2009 the FDM sector contributed to the
UK economy through turnover (£72.7 billion), gross value added (£19.7 billion),
exports (£10.8 billion), employment levels (377,000 average)[1], employment
salaries and tax contributions (£10.1 billion) generated.
Moreover, as a non-cyclical sector, the FDM has shown particular resilience in
the face of major recent challenges such as volatility of raw material prices
and
low consumer confidence during the economic downturn. Moreover, the exchange
rate has favoured exports which grew by 40% in nominal terms during the
2007-2010
period (from £7.7 billion to £10.8 billion).
In contrast, other manufacturing sectors have been severely affected by the
economic downturn, reducing their turnover by 15% between 2007-2009 (from £441
billion to £376 billion) and employment salaries and tax contribution by £12
billion
(reaching £66 billion) over the same period.
All these figures indicate that the FDM sector is an important contributor to
the UK economic recovery. However, during the recession, profit margins have
been
squeezed, especially for SMEs.
Therefore, food and drink manufacturers surveyed/interviewed during this project
are requesting a positive regulatory environment to overcome challenges
domestically and improve their competitiveness internationally now and in the
future.
UK turnover food and soft drinks vs. other manufacturing
Notes: a. The increase in turnover in 2008 & 2009 is due to SIC code
reclassification (from 2003 to 2007 system), which brought companies previously
listed
under non-FDM related codes into the FDM sector
Sources: 1. ONS (2011), Annual Business Survey
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More Information
A Grant Thornton report commissioned by Food and Drink Federation. Note that the
case studies in the executive summary were written by the Food and Drink
Federation.
Notes:
[1] According to FDF this does not account for seasonal fluctuations, and
therefore the employment level can peak to 400,000 at some points in the year
Last reviewed: 07 Dec 2011