Report
State of Industry Report Q2 2026
Published: 21 August 2026
Updated: 21 August 2026
Topics
Business confidence among food and drink manufacturers remained downbeat at -31% in Q2 2026, extending a run of negative sentiment for nine consecutive quarters.
With 88% of respondents saying that business conditions have deteriorated since Labour came into power, manufacturers have set out the action they want the Prime Minister to take to help turn the tide. Priorities include keeping labour cost increases in line with inflation, reducing energy costs and reviewing the regulatory burden facing businesses.
5 key takeaways
- Business confidence amongst food and drink manufacturers remains pessimistic for a ninth consecutive quarter, with 91% of respondents said conditions were unchanged or worse than in Q1 2026.
- The conflict in the Middle East has added cost pressures. During the first four months of the conflict, costs rose by 1.2% for large manufacturers and 6.3% for small businesses. 2/3 of manufacturers have absorbed these costs, rather than passing them on.
- As a result of growing cost pressure, investment in future growth is under threat. 87% of manufacturers aren't planning to increase spending on skills and 84% aren't planning to increase investment in R&D over the next year.
- Growing UK sales remains the top priority for food and drink manufacturers, followed by developing new products and restructuring operations to remain competitive.
- Manufacturers have identified the how they think the Prime Minister could east cost pressure. 75% want future minimum wage increases kept in line with inflation, 56% want action to reduce energy costs, and 50% want the government to limit regulatory burden.
