Key drivers of productivity in food and drink manufacturing

Capital Investment

Food and drink manufacturers have continued to invest in capital with an increase of 53% over the last five years (+£1.1 billion). However, the benefits of capital investment can be lost without the skills needed to embed a culture change and see a healthy return on investment.

Innovation

This industry continues to invest heavily in UK science, technology and research and development (R&D). Three quarters of this R&D is self-funded by UK companies, large and small, who are delivering new products, adapting existing ones and providing consumers with the broadest possible choice.

Enterprise

More and more food and drink manufacturers are exporting and demand for British products remains high. Exports of food and drink have almost doubled in value since 2004 and reached £12.3bn in 2015. Diversifying into new markets can drive growth and lead to productivity improvements as businesses seek to meet the different needs of different markets.

Competition

UK manufacturers face a number of challenges including changing shopper habits, supermarket pricing pressures and the drive to adapt products for health to help address obesity. The tough trading conditions connected to retailing are likely to result in slow revenue growth in the next few years if consumer habits remain the same. Slower revenue growth would affect the industry's ability to invest and in turn lower its productivity performance.

Skills

Skills shortages are a major challenge facing the industry. The challenge of an ageing workforce means that 130,000 jobs need to be filled between 2014 and 2024. Food and drink manufacturers find it increasingly difficult to recruit food engineers and scientists. Companies need to secure a high calibre, skilled workforce to drive innovation.