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: Q2 2019 Food & Drink Business Confidence Report

FDF conducted its second quarterly business confidence survey of 2019 between 20 June - 8 July. The survey gauges how business sentiment has evolved across the food and drink manufacturing sector in Q2 2019, in comparison to previous quarters.

We received responses from businesses with a combined turnover of approximately £7.6 billion [1]. Over half of these responses were from small and medium-sized enterprises (SMEs). It is important to note that some responses were received from parent companies on behalf of their subsidiaries, and so the actual number of businesses represented will be higher.

Q2 2019 Economic Background

  • Food and drink output growth was strong in early 2019, rising at a monthly average of 4.3%, compared with 0.6% in 2018 [2] [3]. Evidence from members suggests that this is significantly inflated by the impacts of stockpiling, and is likely to decrease in the months ahead. This is in line with output expectations for the overall economy, which 50% of respondents expect to decline over 2019 , while only 16% forecast a rise
  • Wages in the industry have seen consistent growth [2] [4] since the start of 2019, at a monthly average rate of 1.7% (although slightly slower than wage growth last year). Inflation has remained stable during the first half of 2019, rising by only 0.1 percentage points between January and May [5]. Figures for May show a 1% rise in prices of food and non-alcoholic beverages compared with May 2018, which is lower than the economy-wide rate of 2% [5].
  • In Q2 2019, rising input costs including energy, ingredients, and packaging-related costs were all stated as key impacts on businesses by over half of respondents. Brexit-related costs continue to pose a threat to businesses , with 47% reporting increased costs of stockpiling (although lower than in Q1) and 39% reporting a decline in the availability of warehousing.

Confidence Snapshot

Since FDF began this reporting in Q1 2018, net confidence in the industry has declined by 38 percentage points [6].

Q2 Key Impacts

What impacts has your business experienced in the last quarter? [8]

Brexit Preparedness

How prepared for a potential no-deal Brexit will your business be on 31 October, compared with March/April?

Reasons stated by members for their perceived lack of preparedness included:

  • Lack of warehousing space and other capacity constraints;
  • Seasonal demand in Q4 limiting ability to stockpile for a potential 'no-deal';
  • Inability to invest more time and money.

2019 Top 5 Opportunities & Risks

Members ranked the top factors which are considered to be opportunities and risks for business:

Opportunities

  • Increased domestic demand
  • Planned investment in new product launches
  • Planned investment in new machinery
  • Increased demand for healthy food products
  • Increased certainty over future EU relationship [7]

Risks

  • Risk of 'no-deal Brexit'
  • Exchange rate volatility
  • Cost of ingredients
  • UK import tariff uncertainty
  • Border/customs issues

2019 UK Outlook

  • Food and drink manufacturers' overall confidence has seen a steep decline since the start of 2018 [6], as product margins have dropped and input prices risen. In Q2, half of businesses reported declining product margins [9] and 85% expect input prices to rise during 2019.
  • On a positive note, over 40% are still viewing investment in both new product launches and machinery as opportunities for growth this year [9]. This is approximately a seven- percentage point increase on Q2 2018
  • All of the top five risks for 2019 identified by members were Brexit related. They included the risk of 'no-deal Brexit', exchange rate volatility, cost of ingredients, UK import tariff uncertainty, and border/customs issues.
  • The proportion expressing concerns over labour availability has increased more than fourfold [2] [10] in Q2 2019 compared with Q2 2018. Over one third expect their business to experience difficulties accessing permanent and temporary labour in 2019. Higher than in Q1, this shows that even in recent months, expectations around the ability to find essential workers has deteriorated.

2019 Views on the Wider Economy

Does your business expect the following to increase/remain the same/decrease in 2019? [7] [9]

Notes
1 This is an estimate calculated using mid-points of turnover brackets and as such is likely to be a ower-bound estimate.
2 Figures are averages of year-on-year growth rates.
3 Source: Office for National Statistics Index of Production. Figures represent chained volume indices of gross value added, and are calculated from seasonally-adjusted indices (2016=100).
4 Source: Office for National Statistics Monthly Wages and Salaries Survey. Figures represent average weekly earnings growth (excluding bonuses, including arrears) for food products, beverages and tobacco manufacturing from January to April 2019, and are not seasonallyadjusted.
5 Source: Office for National Statistics Consumer Price Inflation. Figures represent year-on-year percentage changes (2015=100).
6 Net confidence figures are calculated on a quarterly basis, and are dependent upon sample size which varies from quarter to quarter. Our Q2 2019 survey received 42 responses, which represents 16% of FDF membership.
7 If a deal is secured with the EU which meets food and drink manufacturers' needs, and this deal is ratified by the UK Parliament.
8 Results here are expressed as a percentage of respondents, and do not represent the scale of increase for each category. Response rates can vary from question to question.
9 Results are expressed as a percentage of respondents to specific questions. Response rates vary from question to question.
10 Response rates vary from quarter to quarter.

Previous reports


Last reviewed: 07 Aug 2019