Business Confidence Survey 2018 - Q3

FDF conducted the third of its new quarterly business surveys between 19 September - 8 October 2018 to gauge confidence levels across the food and drink manufacturing sector in Q3 2018.

We received responses from businesses with a combined turnover of approximately £11.4 billion[*]. Almost two thirds of the responses came from small and medium- sized enterprises (SMEs).

Q3 Economic Background

  • Official economic indicators for the food and drink sector over the first three quarters of 2018 have shown a mixed picture, with growth in average weekly earnings remaining positive and inflation weakening, whilst exports continue to increase.
  • Our latest survey shows that net confidence has decreased by 21 percentage points between Q1 and Q3, with increased cost of stockpiling for no-deal Brexit, decreased product margins and increased energy, packaging, and ingredients costs noted as key impacts on food and drink businesses in Q3.
  • On a positive note, businesses reported increased domestic volume sales and average wages.
  • Despite expectations of over half of businesses surveyed that business investment across the overall UK economy will decrease in 2019, almost a quarter of respondents said that planned investment in new food and drink product launches would be an opportunity for their business going forward.

Confidence Snapshot[**]

When compared with Q2 of 2018, do you believe that general business conditions in Q3 of 2018 have...?

Key Perceived Impacts on Food and Drink Businesses in Q3[***]

2019 UK Outlook

  • Given the number of uncertainties surrounding the future UK-EU relationship, businesses remain split over economic growth for 2019.
  • The majority of businesses surveyed feel that overall business investment will fall, with only 8% expecting investment to rise. This is in line with expectations that interest rates will increase next year.
  • Increased ingredient costs and exchange rate volatility continue to be a concern for members going into 2019 , as many businesses rely on imports of ingredients to produce their finished products. In a similar vein, tariffs and quotas came in as a risk to their business, according to two thirds of businesses.
  • For SMEs, retail market consolidation was quoted as one of the top 3 barriers expected to impact the success of their business in 2019.
  • Specifically, the proposed Sainsbury's/ASDA merger was highlighted, by almost 60% of both large and small respondents, as a possible obstacle next year.
  • Top 3 Opportunities & Risks for 2019

    Opportunities:

    • Increased domestic demand
    • Increased certainty over future EU relationship
    • Planned investment in new product launches

    Risks:

    • Increased ingredients costs
    • Exchange rate volatility
    • Tariffs and quotas

    Views on the Wider Economy for 2019[****]

    Does your business expect the following to increase/remain unchanged/decrease?

    Key Business Asks from the Autumn Budget

  • Given net business confidence across the food and drink sector has decreased over the year to date, it is vital that the right business conditions are created to ensure continued success of the sector going forward.
  • This is a pivotal time for the United Kingdom, as it is now less than six months away from leaving the European Union. The Budget presents opportunities for government to ensure the optimal business conditions are in place to drive greater confidence and further investment in the industry.
  • Member companies have identified the Food and Drink Manufacturing Sector Deal, and increased support for industry innovation, as top priorities when asked what measures they would like to see announced in the 2018 Autumn Budget.
  • Other priorities included:
    • Clarity on Brexit
    • Economic measures to support hard Brexit
    • Free trade agreement with the EU

    Notes
    *This is an estimate calculated using mid-points of turnover brackets. As such this is likely to be a lower-bound estimate.
    **Please note that results here are expressed as a percentage of respondents.
    ***Percentages here represent the share of respondents to our survey and not the scale of increase for each category.
    ****please note that results here are expressed as a percentage of respondents.


Last reviewed: 26 Oct 2018