Report
State of Industry Report Q2 2025
27 August 2025
UK food and drink manufacturers are being squeezed on all sides, with cost pressures persisting, the ongoing impact of recent policy regulations, falling consumer demand, and the uncertainty of looming taxes in the Autumn Budget all adding pressure to our sector.
Confidence among food and drink manufacturers remains very lownegative, standing at -40% in Q2 2025 compared to -43% in Q1 and -47% in Q4.
Topics
Executive summary
- 84% of manufacturers cite the ongoing financial impact of recent government policies as a top concern for the coming year, while nearly two thirds (63%) are concerned about a decline in consumer confidence
- The outlook for investment remains stable, with 84% of manufacturers planning to maintain or increase investment in the next year.
- Labour shortages in the sector rose in Q2, with the vacancy rates now at 4.2% from 3.9% in Q1. This is considerably higher than vacancy rates in broader manufacturing (2.0%) and the UK overall (2.3%).
- Meanwhile, two fifths of businesses (41%) are expecting to decrease their employee headcount over the next 12 months.
- The top priority for most food and drink manufacturers (74%) remains increasing domestic sales, although that is a priority for more larger manufacturers than smaller ones. Product innovation also remains a key strategic focus.
- On average, total production costs are reported to have increased by 6.3% over the year to June, while selling prices rose by 4.4%.
